PAINEWEBBER PACE SELECT ADVISORS TRUST
497, 2001-01-02
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<PAGE>
                      PAINEWEBBER TAX-MANAGED EQUITY FUND
              (A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
                              51 WEST 52ND STREET
                         NEW YORK, NEW YORK 10019-6114

                                                               December 29, 2000

Dear Shareholder,

    The enclosed proxy statement and prospectus asks for your vote on a proposal
that will determine the future of PaineWebber Tax-Managed Equity Fund.

    We are seeking shareholder approval to merge Tax-Managed Equity Fund into
PACE Large Company Value Equity Investments ("PACE Fund"). If the merger is
approved, you will receive shares of the corresponding class of shares of the
PACE Fund in exchange for your Tax-Managed Equity Fund shares, and Tax-Managed
Equity Fund will cease operations. The expenses of each class of shares of the
PACE Fund following the merger would be lower than the current expenses of the
corresponding class of Tax-Managed Equity Fund.

    Mitchell Hutchins is the investment manager for both Funds and has retained
Institutional Capital Corporation, Westwood Management Corporation and State
Street Global Advisors, three unaffiliated firms, to manage the PACE Fund's
assets. Mitchell Hutchins has retained two of the same sub-advisers --
Institutional Capital Corporation and Westwood Management Corporation -- to
manage Tax-Managed Equity Fund's assets. Although the two Funds both invest
primarily in stocks of companies with large market capitalizations, they have
different investment objectives. Tax-Managed Equity Fund seeks to maximize
after-tax total return. PACE Large Company Value Fund seeks capital appreciation
and dividend income, but does not actively seek to maximize after-tax return to
its shareholders. PACE Large Company Value Fund pursues its objective by
investing primarily in stocks of U.S. companies that are believed to be
undervalued and that have total market capitalizations of $4.0 billion or
greater at the time of purchase. Tax-Managed Equity Fund invests primarily in
stocks of large capitalization companies that are believed to have reasonable
valuations and favorable earnings forecasts, but is not required to invest in
companies with any minimum market capitalizations.

    The enclosed document describes the proposed merger more fully and compares
the investment strategies and policies, risk characteristics, operating expenses
and performance histories of the two Funds in more detail. Please read this
document carefully. We have included a "Question and Answer" section that we
believe will be helpful to most investors.

    YOUR VOTE IS VERY IMPORTANT. After reviewing the enclosed document, please
complete, date and sign your proxy card and return it TODAY in the enclosed
postage-paid return envelope. Or you may vote your shares by telephone or the
internet. Voting your shares early will avoid costly follow-up mail and
telephone solicitation.

    THE BOARD UNANIMOUSLY URGES THAT YOU VOTE "FOR" THE PROPOSED MERGER.

                                          Sincerely,

                                          /s/ Brian M. Storms
                                          Brian M. Storms
                                          PRESIDENT
<PAGE>
              PAINEWEBBER TAX-MANAGED EQUITY FUND PROPOSED MERGER
                             QUESTIONS AND ANSWERS

    On October 6, 2000, the Board of Trustees of PaineWebber Managed Investments
Trust ("Managed Investments Trust"), on behalf of its series, PaineWebber
Tax-Managed Equity Fund ("Tax-Managed Equity Fund"), unanimously approved the
merger of Tax-Managed Equity Fund into PACE Large Company Value Equity
Investments ("PACE Large Company Value Fund"), a series of PaineWebber PACE
Select Advisors Trust ("PACE Trust"). This merger, however, can occur only if
Tax-Managed Equity Fund's shareholders approve the transaction. Here are answers
to some of the most commonly asked questions.

WHAT IS A MERGER?

    A fund is said to merge with another fund when it transfers its assets and
liabilities to that other fund; subsequently, the old fund ceases to operate.
Shareholders of the old fund become shareholders of the acquiring fund.

WHY IS THIS MERGER BEING PROPOSED?

    Tax-Managed Equity Fund started operations in December 1998, but its assets
never were very great and have been generally declining over the past 14 months.
As of November 30, 2000, the Fund's net assets were approximately $39.6 million.
As a result of this relatively low and declining asset level, the Fund has been
difficult to manage efficiently and its expenses have remained relatively high.
Even though PACE Large Company Value Fund has a different investment objective,
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") and Managed
Investments Trust's Board believe that Tax-Managed Equity Fund's shareholders
will benefit from the merger because the combined Fund would allow them to
continue to invest in the same types of large capitalization companies that have
been part of Tax-Managed Equity Fund's portfolio since its inception. In
addition, Tax-Managed Equity Fund and PACE Large Company Value Fund both follow
a value-oriented approach in the selection of their investments. Thus, while
there are no PaineWebber funds with a tax-managed orientation similar to that of
Tax-Managed Equity Fund, PACE Large Company Value Fund is similar in terms of
the types of stocks it invests in and its overall investment style. The combined
Fund would also have a much larger asset base to invest, which should provide
greater opportunities for diversifying investments and realizing economies of
scale.

    Although PACE Large Company Value Fund and Tax-Managed Equity Fund both
invest primarily in stocks of companies with large market capitalizations, they
have different investment objectives. Tax-Managed Equity Fund seeks to maximize
after-tax total return. PACE Large Company Value Fund seeks capital appreciation
and dividend income, but does not actively seek to maximize after-tax return to
its shareholders. PACE Large Company Value Fund pursues its objective by
investing primarily in stocks of U.S. companies that are believed to be
undervalued and that have total market capitalizations of $4.0 billion or
greater at the time of purchase. Tax-Managed Equity Fund invests primarily in
common stocks that are believed to have reasonable valuations and favorable
earnings forecasts, but is not required to invest in companies with any minimum
market capitalizations. (See "Comparison of the Funds" on page 6 of the Combined
Proxy Statement/Prospectus for more information on the investment policies and
risks of each Fund.)

    Mitchell Hutchins allocates PACE Large Company Value Fund's assets among
three sub-advisers -- Institutional Capital Corporation, Westwood Management
Corporation and State Street Global Advisors. Effective October 10, 2000,
Mitchell Hutchins allocated Tax-Managed Equity Fund's assets between two of the
same sub-advisers -- Institutional Capital Corporation and Westwood Management
Corporation. Each sub-adviser uses the same basic investment strategy for each
Fund's assets that it manages, except that for Tax-Managed Equity Fund the
sub-advisers also seek to minimize the taxes the Fund's shareholders incur.

HOW MANY SHARES WILL I RECEIVE AT THE TIME OF THE MERGER?

    If the merger is approved, you will receive full and fractional shares of
the corresponding class of PACE Large Company Value Fund having a total value
equal to the total value of your Tax-Managed

                                       2
<PAGE>
Equity Fund shares at the time of the merger. Although the two Funds will have
different net asset values per share, each class of shares of PACE Large Company
Value Fund issued in the merger will otherwise have characteristics that are
substantially identical to the corresponding class of shares of Tax-Managed
Equity Fund.

IF I CURRENTLY ELECT TO RECEIVE MY TAX-MANAGED EQUITY FUND DIVIDEND AS CASH OR
IF I HAVE THE DIVIDEND AUTOMATICALLY REINVESTED INTO THE FUND, WILL MY
DISTRIBUTION CHOICE REMAIN THE SAME FOR MY PACE LARGE COMPANY VALUE FUND SHARES
AFTER THE MERGER?

    Yes, your distribution choice will remain the same after the merger.

WILL I HAVE TO PAY TAXES AS A RESULT OF THE MERGER?

    The merger has been structured as a tax-free transaction, which means that
no gain or loss will be recognized by either Fund as a direct result of the
merger. This means that you will not realize any gain or loss on your receipt of
PACE Large Company Value Fund shares, and that your basis for the PACE Large
Company Value Fund shares you receive in the merger will be the same as the
basis for your Tax-Managed Equity Fund shares.

    Immediately prior to the merger, Tax-Managed Equity Fund will have to
distribute all of its previously undistributed income and net capital gain, if
any, to its shareholders, and that distribution will be taxable to Tax-Managed
Equity Fund shareholders. You should note, however, that both Funds must
distribute by December 31, 2000 their ordinary income for the calendar year
ending December 31, 2000 and net capital gain, if any, for the one-year period
ended October 31, 2000. This distribution must be made regardless of whether the
merger takes place because of tax requirements applicable to all mutual funds.
This means that if you remain a shareholder of Tax-Managed Equity Fund, if the
merger takes place, you may receive two taxable distributions of ordinary income
and net capital gain, if any, within a short period of time.

HOW WILL THE MERGER AFFECT FUND EXPENSES?

    The management fee paid by PACE Large Company Value Fund to Mitchell
Hutchins is greater than the management fee paid by Tax-Managed Equity Fund.
However, the post-merger combined Fund is expected to have overall operating
expenses that are lower than the current operating expenses of Tax-Managed
Equity Fund due to economies of scale. The overall operating expenses of PACE
Large Company Value Fund are also subject to a written management fee waiver
agreement between the Fund and Mitchell Hutchins, which will remain in effect
through December 1, 2002. Even absent that agreement, however, it is expected
that the overall operating expenses of the combined Fund would be lower than the
current operating expenses of Tax-Managed Equity Fund. (For more details about
fees and expenses of each class of shares, see "Comparative Fee Table" on
page 3 of the Combined Proxy Statement/ Prospectus.)

HOW HAVE PACE LARGE COMPANY VALUE FUND AND TAX-MANAGED EQUITY FUND PERFORMED?

    The following tables show the average annual total returns over several time
periods for each class of shares of Tax-Managed Equity Fund and the Class P
shares of PACE Large Company Value Fund (the only outstanding class of shares
during the periods shown). A Fund's past performance does not necessarily
indicate how it will perform in the future. This may be particularly true for
both these Funds because the current sub-advisers did not manage their assets
during the periods shown.

    The table for Tax-Managed Equity Fund reflects sales charges on its
Class A, B and C shares and the higher expenses for these classes due to the
fees paid under their Rule 12b-1 plans. The table for PACE Large Company Value
Fund reflects the maximum annual PaineWebber PACE-SM- Select Advisors Program
fee of 1.50% (which does not apply to shares received in the merger). A footnote
to this table shows the performance of PACE Large Company Value Fund's Class P
shares for the same periods without deduction of this fee. The tables also
compare each Fund's returns to returns of a broad-based market index. The
comparative indices, which are different for the two Funds, are unmanaged and,
therefore, do not reflect the deduction of any sales charges or expenses.

                                       3
<PAGE>
    The different sales charges, expenses and program fees applicable to the
different classes of shares of the two Funds and the different periods for which
performance is shown after the 1999 calendar year make it difficult to compare
the Funds' performance. However, because the Class Y shares of Tax-Managed
Equity Fund are not subject to any sales charges or 12b-1 fees, they are most
comparable to the Class P shares of PACE Large Company Value Fund. The
performance of Tax-Managed Equity Fund's Class Y shares for the 1999 calendar
year can thus be compared to that of the Class P shares of PACE Large Company
Value Fund before deduction of the PACE-SM- Select Advisors Program fee, as
shown in the footnote to that Fund's table.

PACE LARGE COMPANY VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS*
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS                                      CLASS P   RUSSELL 1000
(INCEPTION DATE)                          (8/24/95)  VALUE INDEX
----------------                          ---------  ------------
<S>                                       <C>        <C>
One Year................................    (5.57)%       7.35%
Life of Class...........................    15.20%       20.64%
</TABLE>

-------------------
*  The above performance reflects the deduction of the maximum annual PACE-SM-
   Select Advisors Program fee of 1.50% (which does not apply to shares received
   in the merger). If the program fee were not deducted, the average annual
   total returns of the Fund's Class P shares would be (4.14)% for the year
   ended December 31, 1999 and 16.94% for "Life of Class".

TAX-MANAGED EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS                       CLASS A     CLASS B     CLASS C     CLASS Y    S&P 500
(INCEPTION DATE)           (12/14/98)  (12/14/98)  (12/14/98)  (12/14/98)   INDEX
----------------           ----------  ----------  ----------  ----------  -------
<S>                        <C>         <C>         <C>         <C>         <C>
One Year.................     5.54%        4.62%       8.62%      10.16%    21.03%
Life of Class............     9.48%        8.81%      13.55%      14.09%    25.76%
</TABLE>

WHEN WILL THE PROPOSED MERGER OCCUR?

    The Funds expect to merge in February 2001, assuming Tax-Managed Equity Fund
shareholder approval at the special meeting scheduled to be held on February 1,
2001.

CAN I SELL OR EXCHANGE MY TAX-MANAGED EQUITY FUND SHARES BEFORE THE MERGER?

    If you do not wish to receive shares of PACE Large Company Value Fund, you
are free to sell or exchange your Tax-Managed Equity Fund shares at any time
prior to the merger. You will be subject to any applicable contingent deferred
sales charges and taxes if you sell your Tax-Managed Equity Fund shares. If you
elect to exchange your shares prior to the merger, you may be subject to taxes.
Consult your tax adviser for the tax implications of an exchange. Please call
your Financial Advisor to discuss your investment options or with any questions.

WHAT IS THE BOARD'S RECOMMENDATION ON THE MERGER?

    Your Board of Trustees unanimously recommends a vote "FOR" the merger.

                                       4
<PAGE>
                      PAINEWEBBER TAX-MANAGED EQUITY FUND
              (A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
                              51 WEST 52ND STREET
                         NEW YORK, NEW YORK 10019-6114

                              -------------------

                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                                FEBRUARY 1, 2001

                              -------------------

To the Shareholders:

    NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Meeting") of
PaineWebber Tax-Managed Equity Fund ("Tax-Managed Equity Fund"), a series of
PaineWebber Managed Investments Trust ("Managed Investments Trust"), will be
held on February 1, 2001, at 1285 Avenue of the Americas, 14th Floor, New York,
New York, 10019-6028, at 2:00 p.m., Eastern time, for the following purpose:

       To approve or disapprove the Agreement and Plan of Reorganization and
       Termination ("Plan") that provides for the reorganization of Tax-Managed
       Equity Fund into PACE Large Company Value Equity Investments ("PACE Large
       Company Value Fund"), a series of PaineWebber PACE Select Advisors Trust
       ("PACE Trust"). Pursuant to the Plan, Tax-Managed Equity Fund will
       transfer all its assets to PACE Large Company Value Fund, which will
       assume all the stated liabilities of Tax-Managed Equity Fund, and PACE
       Trust will issue to each Tax-Managed Equity Fund shareholder the number
       of full and fractional shares of the applicable class of PACE Large
       Company Value Fund having an aggregate net asset value that, on the
       effective date of the reorganization, is equal to the aggregate net asset
       value of the shareholder's shares of Tax-Managed Equity Fund.

    Shareholders of record as of the close of business on December 1, 2000, are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.

    Please execute and return promptly in the enclosed envelope the accompanying
proxy, which is being solicited by the Board of Trustees of Managed Investments
Trust, or vote your shares by telephone or the internet. Returning your proxy
promptly is important to ensure a quorum at the Meeting. You may revoke your
proxy at any time before it is exercised by the subsequent execution and
submission of a revised proxy, by giving written notice of revocation to Managed
Investments Trust or by voting in person at the Meeting.

                                          By Order of the Board of Trustees,

                                          DIANNE E. O'DONNELL
                                          SECRETARY

December 29, 2000
51 West 52nd Street
New York, New York 10019-6114
<PAGE>
                             YOUR VOTE IS IMPORTANT
                       NO MATTER HOW MANY SHARES YOU OWN.

     Please indicate your voting instructions on the enclosed proxy card, sign
 and date the card and return it in the envelope provided. IF YOU SIGN, DATE
 AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE
 VOTED "FOR" THE PROPOSAL DESCRIBED ABOVE. In order to avoid the additional
 expense of further solicitation, we ask your cooperation in mailing your proxy
 card promptly. As an alternative to using the paper proxy card to vote, you
 may vote shares that are registered in your name, as well as shares held in
 "street name" through a broker, via the internet or telephone. To vote in this
 manner, you will need the 14-digit "control" number(s) that appear on your
 proxy card(s).

     To vote via the internet, please access https://vote.proxy-direct.com on
 the World Wide Web and follow the on-screen instructions.

     You may also call 1-800-597-7836 and vote by telephone.

     If we do not receive your completed proxy cards after several weeks, our
 proxy solicitor, Shareholder Communications Corporation, may contact you. Our
 proxy solicitor will remind you to vote your shares or will record your vote
 over the phone if you choose to vote in that manner.

                                       ii
<PAGE>
                      INSTRUCTIONS FOR SIGNING PROXY CARDS

     The following general rules for signing proxy cards may be of assistance
 to you and avoid the time and expense involved in validating your vote if you
 fail to sign your proxy card properly.

     1.  Individual Accounts: Sign your name exactly as it appears in the
 registration on the proxy card.

     2.  Joint Accounts: Either party may sign, but the name of the party
 signing should conform exactly to the name shown in the registration on the
 proxy card.

     3.  All Other Accounts: The capacity of the individual signing the proxy
 card should be indicated unless it is reflected in the form of registration.
 For example:

<TABLE>
<CAPTION>
                        REGISTRATION                            VALID SIGNATURE
                        ------------                            ---------------
    <C>   <S>                                       <C>
    Corporate Accounts
     (1)  ABC Corp................................  ABC Corp.
                                                    John Doe, Treasurer
     (2)  ABC Corp................................  John Doe, Treasurer
     (3)  ABC Corp. c/o John Doe, Treasurer.......  John Doe
     (4)  ABC Corp. Profit Sharing Plan...........  John Doe, Trustee
    Partnership Accounts
     (1)  The XYZ Partnership.....................  Jane B. Smith, Partner
     (2)  Smith and Jones, Limited Partnership....  Jane B. Smith, General Partner
    Trust Accounts
     (1)  ABC Trust Account.......................  Jane B. Doe, Trustee
     (2)  Jane B. Doe, Trustee u/t/d 12/28/78.....  Jane B. Doe
    Custodial or Estate Accounts
     (1)  John B. Smith, Cust. f/b/o
          John B. Smith, Jr.,
          UGMA/UTMA...............................  John B. Smith
     (2)  Estate of John B. Smith.................  John B. Smith, Jr., Executor
</TABLE>

                                      iii
<PAGE>
                    [This page is intentionally left blank.]
<PAGE>
                      PAINEWEBBER TAX-MANAGED EQUITY FUND
              (A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
                              51 WEST 52ND STREET
                         NEW YORK, NEW YORK 10019-6114
                                 1-800-647-1568

                  PACE LARGE COMPANY VALUE EQUITY INVESTMENTS
              (A SERIES OF PAINEWEBBER PACE SELECT ADVISORS TRUST)
                              51 WEST 52ND STREET
                         NEW YORK, NEW YORK 10019-6114
                                 1-800-647-1568

                              -------------------

                    COMBINED PROXY STATEMENT AND PROSPECTUS
                            DATED: DECEMBER 29, 2000

                              -------------------

    This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished in connection with a Special Meeting of Shareholders of
PaineWebber Tax-Managed Equity Fund ("Tax-Managed Equity Fund"), a series of
PaineWebber Managed Investments Trust ("Managed Investments Trust"), a
Massachusetts business trust, to be held on February 1, 2001, at 1285 Avenue of
the Americas, 14th Floor, New York, New York, 10019-6028, at 2:00 p.m., Eastern
time (such meeting and any adjournments thereof are referred to collectively as
the "Meeting"). At the Meeting, the shareholders of Tax-Managed Equity Fund will
be asked to consider and approve the following proposal:

       To approve or disapprove the Agreement and Plan of Reorganization and
       Termination ("Plan") that provides for the reorganization of Tax-Managed
       Equity Fund into PACE Large Company Value Equity Investments ("PACE Large
       Company Value Fund"), a series of PaineWebber PACE Select Advisors Trust
       ("PACE Trust"). Pursuant to the Plan, Tax-Managed Equity Fund will
       transfer all its assets to PACE Large Company Value Fund, which will
       assume all the stated liabilities of Tax-Managed Equity Fund, and PACE
       Trust will issue to each Tax-Managed Equity Fund shareholder the number
       of full and fractional shares of the applicable class of PACE Large
       Company Value Fund having an aggregate net asset value that, on the
       effective date of the reorganization, is equal to the aggregate net asset
       value of the shareholder's shares of Tax-Managed Equity Fund.

    A form of the Plan is attached as Appendix A to this Proxy
Statement/Prospectus. THE BOARD OF TRUSTEES OF MANAGED INVESTMENTS TRUST HAS
UNANIMOUSLY APPROVED THE PLAN AS BEING IN THE BEST INTERESTS OF TAX-MANAGED
EQUITY FUND AND ITS SHAREHOLDERS. (Tax-Managed Equity Fund and PACE Large
Company Value Fund sometimes are referred to individually as a "Fund" and
together as "Funds.")

    Pursuant to the Plan, Tax-Managed Equity Fund will transfer all its assets
to PACE Large Company Value Fund, which will assume all the stated liabilities
of Tax-Managed Equity Fund, and PACE Trust will issue to each Tax-Managed Equity
Fund shareholder the number of full and fractional shares of beneficial interest
in the applicable class of PACE Large Company Value Fund having an aggregate net
asset value ("NAV") that, on the effective date of the reorganization, is equal
to the aggregate NAV of the shareholder's shares of beneficial interest in the
corresponding class of Tax-Managed Equity Fund (the "Reorganization"). The value
of each Tax-Managed Equity Fund shareholder's account with PACE Large Company
Value Fund immediately after the Reorganization will be the same as the value of
such

    AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SEC HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE INFORMATION IN THIS PROXY
STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS
COMMITTING A CRIME.
<PAGE>
shareholder's account with Tax-Managed Equity Fund immediately prior to the
Reorganization. As a result of the Reorganization, shareholders of each class of
shares of Tax-Managed Equity Fund will become shareholders of the corresponding
class of shares of PACE Large Company Value Fund. No sales charges will be
assessed on the shares of PACE Large Company Value Fund issued in connection
with the Reorganization.

    PACE Large Company Value Fund is a diversified series of PACE Trust, which
is an open-end management investment company currently comprised of twelve
series. PACE Large Company Value Fund's investment objective is capital
appreciation and dividend income. The Fund seeks to achieve its investment
objective by investing primarily in stocks of U.S. companies that are believed
to be undervalued and that have total market capitalizations of $4.0 billion or
greater at the time of purchase. The Fund seeks income primarily from dividend
paying stocks. Mitchell Hutchins allocates the Fund's assets among three
sub-advisers.

    This Proxy Statement/Prospectus sets forth the information that a
Tax-Managed Equity Fund shareholder should know before voting on the Plan. It
should be read carefully and retained for future reference.

    A Statement of Additional Information ("SAI") dated December 29, 2000,
containing additional information about the Reorganization, including historical
financial statements, has been filed with the Securities and Exchange Commission
("SEC") and is hereby incorporated by reference in its entirety into this Proxy
Statement/Prospectus. PACE Large Company Value Fund's Annual Report to
Shareholders for the fiscal year ended July 31, 2000, has been filed with the
SEC and is incorporated by reference in the SAI. Information about Tax-Managed
Equity Fund is included in its current Prospectus and SAI, each dated
December 6, 1999, as supplemented, which are on file with the SEC and are hereby
incorporated by reference into this Proxy Statement/Prospectus. Copies of the
other referenced documents, as well as Tax-Managed Equity Fund's Annual Report
to Shareholders for the fiscal year ended August 31, 2000, are available without
charge by writing either Tax-Managed Equity Fund or PACE Large Company Value
Fund at the address shown above, or by calling 1-800-647-1568. The SEC maintains
an internet web site at http:// www.sec.gov that contains information regarding
PACE Trust and Managed Investments Trust. Copies of such material may also be
obtained, after paying a duplicating fee, from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, DC, 20549, or by electronic request at the following
e-mail address: [email protected]. Additional information about the Funds also
may be obtained on the Web at http://www.painewebber.com.

                                       ii
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION TITLE                                       PAGE
-------------                                       ----
<S>                                                 <C>
INTRODUCTION......................................    1
PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT
  AND PLAN OF REORGANIZATION AND TERMINATION......    2
SYNOPSIS..........................................    2
  The Proposed Reorganization.....................    2
  Comparative Fee Table...........................    3
  Summary Comparison of the Funds.................    4
COMPARISON OF PRINCIPAL RISK FACTORS..............    5
  Primary Differences in the Investment Risks of
    the Funds.....................................    6
COMPARISON OF THE FUNDS...........................    6
  Investment Objectives...........................    6
  Investment Policies.............................    6
  Operations of PACE Large Company Value Fund
    Following the Reorganization..................    8
  Performance.....................................    9
  Sales Charges...................................   11
  Dividends and Other Distributions...............   11
  Taxes...........................................   11
FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING
  SHARES OF PACE LARGE COMPANY VALUE FUND.........   11
  Flexible Pricing................................   11
  Buying Shares...................................   15
  Selling Shares..................................   16
  Exchanging Shares...............................   16
  Pricing and Valuation...........................   17
MANAGEMENT........................................   18
  Investment Manager and Investment Adviser.......   18
  Sub-Advisers....................................   18
  Advisory Fees and Fund Expenses.................   19
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION...   19
  Reasons for the Reorganization..................   19
  Terms of the Reorganization.....................   21
  Description of Securities to be Issued..........   23
  Temporary Waiver of Investment Restrictions.....   23
  Federal Income Tax Considerations...............   23
  Required Vote...................................   24
ORGANIZATION OF THE FUNDS.........................   24
FINANCIAL HIGHLIGHTS..............................   24
CAPITALIZATION....................................   26
LEGAL MATTERS.....................................   26
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
  COMMISSION......................................   27
EXPERTS...........................................   27
OTHER INFORMATION.................................   27
APPENDIX A: Form of Agreement and Plan of
  Reorganization and Termination..................  A-1
APPENDIX B: Security Ownership of Certain
  Beneficial Owners...............................  B-1
APPENDIX C: Management's Discussion of PACE Large
  Company Value Fund's Performance................  C-1
</TABLE>

                                      iii
<PAGE>
                                  INTRODUCTION

    This Proxy Statement/Prospectus is being furnished to shareholders of
Tax-Managed Equity Fund, a series of Managed Investments Trust, in connection
with the solicitation of proxies by the Board for use at the Meeting. All
properly executed and unrevoked proxies received in time for the Meeting will be
voted as instructed by shareholders. Approval of the proposal requires the
affirmative vote of the lesser of (1) 67% or more of the shares of Tax-Managed
Equity Fund present at the Meeting, if more than 50% of the outstanding shares
are represented at the Meeting in person or by proxy, or (2) more than 50% of
the outstanding shares entitled to vote at the Meeting. If you execute your
proxy but give no voting instructions, your shares that are represented by
proxies will be voted "FOR" the proposal described in this Proxy
Statement/Prospectus. The presence in person or by proxy of Tax-Managed Equity
Fund shareholders entitled to cast a majority of all the votes entitled to be
cast at the Meeting will constitute a quorum. If a quorum is not present at the
Meeting or a quorum is present but sufficient votes to approve the proposal are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of the shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote "FOR" the proposal in favor of such an
adjournment and will vote those proxies required to be voted "AGAINST" the
proposal against such adjournment.

    Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present at the Meeting for quorum purposes but will not be
(i) considered votes cast at the Meeting or (ii) voted for or against any
adjournment or proposal. Abstentions and broker non-votes are effectively votes
against the proposal.

    Any person giving a proxy has the power to revoke it at any time prior to
its exercise by executing a superseding proxy or by submitting a written notice
of revocation to the Secretary of Managed Investments Trust ("Secretary"). To be
effective, such revocation must be received by the Secretary prior to the
Meeting. In addition, although mere attendance at the Meeting will not revoke a
proxy, a shareholder present at the Meeting may withdraw his or her proxy by
voting in person.

    Mitchell Hutchins (not the Funds) will bear the expenses of the
Reorganization. Managed Investments Trust intends to first mail this Proxy
Statement/Prospectus and the accompanying proxy card on or about December 29,
2000. Shareholders of record as of the close of business on December 1, 2000
("Record Date"), are entitled to vote at the Meeting. On the Record Date,
Tax-Managed Equity Fund had 2,972,893 shares issued and outstanding, consisting
of 765,012 Class A shares, 1,456,349 Class B shares, 731,726 Class C shares, and
19,806 Class Y shares. Shareholders are entitled to one vote for each full share
held and a fractional vote for each fractional share held. Except as set forth
in Appendix B, as of the Record Date, Mitchell Hutchins, the investment manager,
administrator and distributor of both Funds, does not know of any person who
owns beneficially or of record 5% or more of any class of shares of either Fund.
As of that same date, the trustees and officers of Tax-Managed Equity Fund, as a
group, owned approximately 10.50% of Tax-Managed Equity Fund's Class A shares
and less than 1% of any other class of the Fund's shares. As of that same date,
the trustees and officers of PACE Trust, as a group, owned less than 1% of any
class of PACE Large Company Value Fund's outstanding shares.

    Managed Investments Trust has engaged the services of Shareholder
Communications Corporation ("SCC") to assist it in the solicitation of proxies
for the Meeting. Managed Investments Trust expects to solicit proxies by mail,
telephone and via the internet. Managed Investments Trust officers and employees
of Mitchell Hutchins who assist in the proxy solicitation will not receive any
additional or special compensation for any such efforts. SCC will be paid
approximately $3,000 for proxy solicitation services. Managed Investments Trust
will request broker/dealer firms, custodians, nominees and fiduciaries to
forward proxy materials to the beneficial owners of the shares held of record by
such persons. Mitchell

                                       1
<PAGE>
Hutchins may reimburse such broker/dealer firms, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection with such proxy
solicitation.

PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT AND PLAN OF REORGANIZATION AND
                                  TERMINATION

                                    SYNOPSIS

    The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus, the Statement of Additional Information, and
the Plan. As discussed more fully below, Managed Investments Trust's Board
believes that the proposed Reorganization will benefit Tax-Managed Equity Fund's
shareholders.

THE PROPOSED REORGANIZATION

    The Boards of PACE Trust and Managed Investments Trust, including their
respective Trustees who are not "interested persons," as that term is defined in
the Investment Company Act of 1940, as amended ("1940 Act") ("Independent
Trustees"), considered and approved the Plan at meetings held on September 13,
2000 and October 6, 2000, respectively. The Plan provides for the acquisition by
PACE Large Company Value Fund of all of Tax-Managed Equity Fund's assets in
exchange for PACE Large Company Value Fund shares and the assumption by PACE
Large Company Value Fund of all of Tax-Managed Equity Fund's stated liabilities.
Tax-Managed Equity Fund will then distribute the PACE Large Company Value Fund
shares to Tax-Managed Equity Fund's shareholders, by class, so that each Tax-
Managed Equity Fund shareholder will receive the number of full and fractional
shares of the corresponding class of PACE Large Company Value Fund equal in
aggregate NAV to the aggregate NAV of the shares of Tax-Managed Equity Fund that
the shareholder held at the time of the Reorganization. These transactions are
scheduled to occur as of 4:00 p.m., Eastern time, on February 23, 2001, or on
such later date as the conditions to consummation of the Reorganization are
satisfied ("Closing Date"). Tax-Managed Equity Fund will be terminated as soon
as is practicable after the Closing Date. See "Additional Information About the
Reorganization," below.

    Managed Investments Trust and PACE Trust will each receive an opinion of
Kirkpatrick & Lockhart LLP to the effect that the Reorganization will constitute
a tax-free reorganization within the meaning of section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended ("Code"). Accordingly, neither Fund
nor any of its shareholders will recognize any gain or loss for federal income
tax purposes as a direct result of the Reorganization. To the extent Tax-Managed
Equity Fund sells securities prior to the Closing Date, it may recognize net
gains or losses. Any such net recognized gains would increase the amount of any
distribution made to shareholders of Tax-Managed Equity Fund prior to the
Closing Date. See "Additional Information About the Reorganization -- Federal
Income Tax Considerations," below.

    For the reasons set forth below under "Additional Information About the
Reorganization -- Reasons for the Reorganization," the Board of Managed
Investments Trust has determined that the Reorganization is in the best
interests of Tax-Managed Equity Fund and that the interests of existing
Tax-Managed Equity Fund shareholders will not be diluted as a result of the
Reorganization. ACCORDINGLY, MANAGED INVESTMENTS TRUST'S BOARD UNANIMOUSLY
RECOMMENDS APPROVAL OF THE REORGANIZATION.

                                       2
<PAGE>
COMPARATIVE FEE TABLE

    The table below describes the fees and expenses that you would pay if you
buy and hold Tax-Managed Equity Fund shares or PACE Large Company Value Fund
shares before the Reorganization and PACE Large Company Value Fund shares after
the Reorganization. The "Annual Fund Operating Expenses" set forth below are
based on the fees and expenses for the fiscal year ended July 31, 2000 for PACE
Large Company Value Fund and for the fiscal year ended August 31, 2000 for
Tax-Managed Equity Fund. The PRO FORMA information reflects the anticipated
effects of the Reorganization as well as the proposed reorganization of
PaineWebber Growth and Income Fund with PACE Large Company Value Fund, which is
expected to occur at approximately the same time as the Reorganization.

<TABLE>
<CAPTION>
                                                                                                    COMBINED PACE LARGE COMPANY
                                                                                                            VALUE FUND
                              TAX-MANAGED EQUITY FUND          PACE LARGE COMPANY VALUE FUND                PRO FORMA*
                        ----------------------------------- ----------------------------------- -----------------------------------
                        CLASS A  CLASS B  CLASS C  CLASS Y  CLASS A  CLASS B  CLASS C  CLASS Y  CLASS A  CLASS B  CLASS C  CLASS Y
                        -------  -------  -------  -------  -------  -------  -------  -------  -------  -------  -------  -------
<S>                     <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge
  (load) Imposed on
  Purchases (AS A
  PERCENTAGE OF
  OFFERING PRICE)......    4.5%    None     None     None      4.5%    None     None     None      4.5%    None     None     None
Maximum Deferred Sales
  Charge (load) (AS A
  PERCENTAGE OF
  ORIGINAL PURCHASE
  PRICE OR REDEMPTION
  PROCEEDS, WHICHEVER
  IS LESS).............   None        5%       1%    None     None        5%       1%    None     None        5%       1%    None
Exchange Fee...........   None     None     None     None     None     None     None     None     None     None     None     None

ANNUAL FUND OPERATING EXPENSES (FEES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees**......   0.75%    0.75%    0.75%    0.75%    0.80%    0.80%    0.80%    0.80%    0.80%    0.80%    0.80%    0.80%
Distribution and/or
  Service (12b-1)
  Fees.................   0.25%    1.00%    1.00%    None     0.25%    1.00%    1.00%    None     0.25%    1.00%    1.00%    None
Other Expenses***......   0.56%    0.58%    0.57%    0.56%    0.17%    0.19%    0.18%    0.16%    0.15%    0.17%    0.16%    0.12%
                        ------   ------   ------   ------   ------   ------   ------   ------   ------   ------   ------   ------
Total Annual Fund
  Operating Expenses...   1.56%    2.33%    2.32%    1.31%    1.22%    1.99%    1.98%    0.96%    1.20%    1.97%    1.96%    0.92%
                        ======   ======   ======   ======   ======   ======   ======   ======   ======   ======   ======   ======

Management Fee
  Waiver/Expense
  Reimbursements+......    N/A      N/A      N/A      N/A    (0.07)%  (0.07)%  (0.07)%  (0.07)%  (0.07)%  (0.07)%  (0.07)%  (0.07)%
                        ------   ------   ------   ------   ------   ------   ------   ------   ------   ------   ------   ------
Net Expenses+..........   1.56%    2.33%    2.32%    1.31%    1.15%    1.92%    1.91%    0.89%    1.13%    1.90%    1.89%    0.85%
                        ======   ======   ======   ======   ======   ======   ======   ======   ======   ======   ======   ======
</TABLE>

---------------------------

  *  The PRO FORMA expense information assumes that shareholders of Tax-Managed
     Equity Fund and PaineWebber Growth and Income Fund approve the proposed
     reorganizations. If shareholders of Tax-Managed Equity Fund approve the
     Reorganization and shareholders of PaineWebber Growth and Income Fund do
     not approve its reorganization, the PRO FORMA "Net Expenses" for each class
     of shares of the combined Fund would be the same as shown above for PACE
     Large Company Value Fund due to the relatively small size of Tax-Managed
     Equity Fund and the fee waiver agreement in effect for PACE Large Company
     Value Fund.

 **  For both Funds, "Management Fees" include fees paid to Mitchell Hutchins
     for administrative services.

***  "Other Expenses" for PACE Large Company Value Fund are estimated based on
     the "other expenses" of the Fund's outstanding Class P shares for the
     fiscal year ended July 31, 2000, as adjusted to reflect estimated transfer
     agency expenses for each class. "Other Expenses" for each class of the
     combined Fund are based on the combined assets of Tax-Managed Equity Fund,
     PaineWebber Growth and Income Fund and PACE Large Company Value Fund.

  +  PACE Trust and Mitchell Hutchins have entered into a written agreement with
     respect to PACE Large Company Value Fund under which Mitchell Hutchins is
     contractually obligated to waive its management fee through December 1,
     2002 to the extent necessary to reflect the lower overall fees paid to the
     Fund's sub-advisers as a result of the lower sub-advisory fee paid to State
     Street Global Advisors. The effect of this management fee waiver is
     reflected in the above table.

                                       3
<PAGE>
    The example below is intended to help you compare the costs of investing in
each Fund, both before and after the Reorganization.

    The example below assumes that you invest $10,000 in each Fund (including
the combined Fund) for the time periods indicated and then sell all of your
shares at the end of those periods. The example also assumes that your
investments each have a 5% return each year and that each Fund's operating
expenses remain the same, except for the two-year period when PACE Large Company
Value Fund's and the combined Fund's expenses are lower due to the agreement
with Mitchell Hutchins. Although your actual returns and costs may be higher or
lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
                                1 YEAR  3 YEARS  5 YEARS  10 YEARS
                                ------  -------  -------  --------
<S>                             <C>     <C>      <C>      <C>
TAX-MANAGED EQUITY FUND
Class A.......................   $602   $  920   $1,262    $2,223
Class B (assuming sale of all
  shares at end of period)....    736    1,027    1,445     2,297
Class B (assuming no sale of
  shares).....................    236      727    1,245     2,297
Class C (assuming sale of all
  shares at end of period)....    335      724    1,240     2,656
Class C (assuming no sale of
  shares).....................    235      724    1,240     2,656
Class Y.......................    133      415      718     1,579
PACE LARGE COMPANY VALUE FUND
Class A.......................   $562   $  806   $1,077    $1,849
Class B (assuming sale of all
  shares at end of period)....    695      911    1,259     1,923
Class B (assuming no sale of
  shares).....................    195      611    1,059     1,923
Class C (assuming sale of all
  shares at end of period)....    294      607    1,054     2,295
Class C (assuming no sale of
  shares).....................    194      607    1,054     2,295
Class Y.......................     91      292      517     1,165
PRO FORMA PACE LARGE COMPANY
  VALUE FUND
Class A.......................   $560   $  800   $1,067    $1,827
Class B (assuming sale of all
  shares at end of period)....    693      904    1,249     1,902
Class B (assuming no sale of
  shares).....................    193      604    1,049     1,902
Class C (assuming sale of all
  shares at end of period)....    292      601    1,044     2,274
Class C (assuming no sale of
  shares).....................    192      601    1,044     2,274
Class Y.......................     87      279      495     1,118
</TABLE>

SUMMARY COMPARISON OF THE FUNDS

INVESTMENT OBJECTIVES AND POLICIES

    Tax-Managed Equity Fund and PACE Large Company Value Fund both invest
primarily in stocks of companies with large market capitalizations and have
similar overall risk characteristics. Both Funds also follow a value-oriented
approach in the selection of their investments. However, the two Funds have
different investment objectives. Tax-Managed Equity Fund seeks to maximize
after-tax total return. PACE Large Company Value Fund seeks capital appreciation
and dividend income, but does not actively seek to maximize after-tax total
return to its shareholders. PACE Large Company Value Fund invests primarily in
stocks of U.S. companies that are believed to be undervalued and that have total
market capitalizations of $4.0 billion or greater at the time of purchase. PACE
Large Company Value Fund may invest, to a limited extent, in other securities,
including stocks of companies with smaller total market capitalizations. Tax-
Managed Equity Fund invests primarily in stocks of large capitalization
companies that are believed to have reasonable valuations and favorable earnings
forecasts, but is not required to invest in companies with any minimum market
capitalizations. Tax-Managed Equity Fund also may invest in convertible bonds,
including, to a limited extent, those that are not investment grade. Tax-Managed
Equity Fund's sub-advisers seek to minimize the taxes the Fund's shareholders
incur, primarily by minimizing the Fund's realized capital gains and by
realizing capital losses that can offset present or future capital gains.
Mitchell

                                       4
<PAGE>
Hutchins allocates PACE Large Company Value Fund's assets among three
sub-advisers -- Institutional Capital Corporation ("ICAP"), Westwood Management
Corporation ("Westwood") and State Street Global Advisors ("SSgA"). Tax-Managed
Equity Fund's assets are allocated between two of the same sub-advisers -- ICAP
and Westwood.

INVESTMENT ADVISORY SERVICES

    Mitchell Hutchins has served as investment manager and administrator for
PACE Large Company Value Fund since its inception in August 1995. As investment
manager for the Fund, Mitchell Hutchins provides portfolio management oversight
rather than directly managing the Fund's investments. Mitchell Hutchins provides
portfolio management oversight principally by performing initial reviews of
prospective sub-advisers and supervising and monitoring the performance of those
sub-advisers thereafter. Mitchell Hutchins also recommends to the Board of PACE
Trust whether agreements with sub-advisers should be renewed, modified or
terminated. The Fund's three current sub-advisers -- ICAP, Westwood and SSgA --
have managed the Fund's investment portfolio since July 1, 2000 (ICAP and
Westwood) and October 10, 2000 (SSgA). Prior to July 1, 2000, a different
sub-adviser managed all the Fund's assets.

    Mitchell Hutchins has served as the investment manager or investment adviser
and as administrator for Tax-Managed Equity Fund since its inception on
December 14, 1998 and directly managed the investment portfolio of Tax-Managed
Equity Fund until October 10, 2000. On that date, the Fund's two current
sub-advisers -- ICAP and Westwood -- assumed responsibility for managing the
assets of the Fund as allocated to them by Mitchell Hutchins.

PURCHASE AND REDEMPTION PROCEDURES

    Funds in the PaineWebber Flexible Pricing-SM- System generally offer
Class A, Class B, Class C and Class Y shares. PACE Large Company Value Fund did
not offer Class A, Class B, Class C and Class Y shares to the public prior to
November 27, 2000. The purchase and redemption procedures for PACE Large Company
Value Fund's Class A, Class B, Class C and Class Y shares are the same as those
currently in effect for the corresponding classes of shares of Tax-Managed
Equity Fund. You may exchange Class A, Class B or Class C shares of PACE Large
Company Value Fund for shares of the same class of most other PACE funds or
PaineWebber Money Market Fund. Exchanges between other PaineWebber funds and
PACE funds will not be activated until on or around March 1, 2001. You may not
exchange Class Y shares.

                      COMPARISON OF PRINCIPAL RISK FACTORS

    Both Funds are subject to similar risk factors associated with their
investments in equities. An investment in either Fund is not guaranteed; an
investor may lose money by investing in either Fund. The principal risks
presented by the Funds are:

    EQUITY RISK -- The prices of common stocks and other equity securities
generally fluctuate more than those of other investments. They reflect changes
in the issuing company's financial condition and changes in the overall market.
A Fund could lose a substantial part, or even all, of the value of its
investment in a company's stock.

    DERIVATIVES RISK -- The value of "derivatives" -- so-called because their
value "derives" from the value of an underlying asset, reference rate or
index -- may rise or fall more rapidly than other investments. For some
derivatives, it is possible for a Fund to lose more than the amount it invested
in the derivative. Options and futures contracts are examples of derivatives. A
Fund's use of derivatives may not succeed for various reasons, including
unexpected changes in the values of the derivatives or the assets underlying
them. Also, if a Fund uses derivatives to adjust or "hedge" the overall risk of
its portfolio, the hedge may not succeed if changes in the values of the
derivatives are not matched by opposite changes in the values of the assets
being hedged.

                                       5
<PAGE>
PRIMARY DIFFERENCES IN THE INVESTMENT RISKS OF THE FUNDS

    RISK OF TAX MANAGEMENT STRATEGIES -- By following tax-management strategies,
Tax-Managed Equity Fund may miss opportunities to purchase or sell securities at
advantageous times. Notwithstanding Tax-Managed Equity Fund's use of tax
management strategies, the Fund may have taxable income and may realize taxable
capital gains from time to time. In addition, investors purchasing shares of
Tax-Managed Equity Fund when the Fund has accumulated capital gains could
receive a significant part of the purchase price of their shares back as a
taxable capital gain distribution. State or federal tax laws or regulations may
be amended at any time, including adverse changes to applicable tax rates or
long-term capital gain holding periods. Over time, securities with unrealized
gains may comprise a substantial portion of Tax-Managed Equity Fund's assets.
While the Fund may use a number of strategies to avoid having to recognize large
capital gains, these strategies may not be successful.

    FOREIGN INVESTING RISK -- Foreign investing involves risks relating to
political, social and economic developments abroad to a greater extent than
investing in the securities of U.S. issuers. In addition, there are differences
between U.S. and foreign regulatory requirements and market practices.
Tax-Managed Equity Fund may invest a larger portion of its total assets (25%) in
these securities than PACE Large Company Value Fund (10%) and is more exposed to
foreign investing risk to the extent it does so.

    INDEX STRATEGY RISK -- SSgA seeks to outperform (before deducting fees and
expenses) the return of the Russell 1000 Value Index for the portion of PACE
Large Company Value Fund's assets that it manages. SSgA's proprietary strategies
may not result in the portion of PACE Large Company Value Fund's assets it
manages outperforming the total return of the designated index, and these assets
may underperform relative to the index. PACE Large Company Value Fund's
performance also may deviate from that of the index because of shareholder
purchases and sales of shares, which can occur daily, and because of fees and
expenses borne by the Fund.

                            COMPARISON OF THE FUNDS

INVESTMENT OBJECTIVES

    The Funds have different investment objectives. Tax-Managed Equity Fund's
investment objective is to maximize after-tax total return. PACE Large Company
Value Fund's investment objective is capital appreciation and dividend income.
PACE LARGE COMPANY VALUE FUND DOES NOT ACTIVELY SEEK TO MAXIMIZE ITS AFTER-TAX
RETURN TO ITS SHAREHOLDERS.

INVESTMENT POLICIES

    PACE Large Company Value Fund invests primarily in stocks of U.S. companies
that are believed to be undervalued and that have total market capitalizations
of $4.0 billion or greater at the time of purchase. PACE Large Company Value
Fund seeks income primarily from dividend paying stocks. The Fund also may
invest, to a limited extent, in other securities, including stocks of companies
with smaller total market capitalizations and convertible bonds that are below
investment grade (commonly known as "junk bonds").

    Tax-Managed Equity Fund invests primarily in common stocks that are believed
to have reasonable valuations and favorable earnings forecasts. Although
Tax-Managed Equity Fund is not required to invest in companies with any minimum
market capitalizations, the Fund invests primarily in stocks of companies with
large market capitalizations. Tax-Managed Equity Fund's sub-advisers seek to
minimize the taxes the Fund's shareholders incur, primarily by minimizing the
Fund's realized capital gains and by realizing capital losses that can offset
present or future capital gains. The Fund's investments also may include
convertible bonds, including to a limited extent those that are not investment
grade.

    Mitchell Hutchins allocates PACE Large Company Value Fund's assets among
three sub-advisers -- ICAP, Westwood and SSgA. Tax-Managed Equity Fund's assets
are allocated to two of the same sub-advisers -- ICAP and Westwood. Mitchell
Hutchins has initially allocated approximately 50% of PACE

                                       6
<PAGE>
Large Company Value Fund's assets to SSgA and approximately 25% each to ICAP and
Westwood. Mitchell Hutchins can change this allocation at any time. The relative
values of each sub-adviser's shares of a Fund's assets also may change over
time.

    In managing its share of each Fund's assets, ICAP uses its proprietary
valuation model to identify large-capitalization companies that ICAP believes
offer the best relative values because they sell below the price-to-earnings
ratio warranted by their prospects. ICAP looks for companies where a catalyst
for a positive change is about to occur with potential to produce stock
appreciation of 20% or more relative to the market over a 12 to 18 month period.
The catalyst can be thematic (E.G., global economic recovery) or company
specific (E.G., a corporate restructuring or a new product). ICAP also uses
internally generated research to evaluate the financial condition and business
prospects of every company it considers. ICAP monitors each stock purchased and
sells the stock when its target price is achieved, the catalyst becomes
inoperative or ICAP identifies another stock with greater opportunity for
appreciation.

    In managing its share of each Fund's assets, Westwood maintains a list of
securities that it believes have proven records and potential for above-average
earnings growth. It considers purchasing a security on such list if Westwood's
forecast for growth rates and earnings estimates exceeds Wall Street
expectations or Westwood's forecasted price/earnings ratio is less than the
forecasted growth rate. Westwood monitors each stock purchased and will sell a
stock if Westwood expects limited future price appreciation or the projected
price/earnings ratio exceeds the three-year growth rate.

    In managing its share of PACE Large Company Value Fund's assets, SSgA seeks
to outperform the Russell 1000 Value Index (before deducting fees and expenses).
SSgA uses several independent valuation measures to identify investment
opportunities within a large cap value universe and combines factors to produce
an overall rank. Comprehensive research determines the optimal weighting of
these perspectives to arrive at strategies that vary by industry. SSgA ranks all
companies within the investable universe from top to bottom based on their
relative attractiveness. SSgA constructs the Fund's portfolio by selecting the
highest ranked stocks from the universe and managing deviations from the
benchmark to maximize the risk/reward trade-off. The resulting portfolio has
characteristics similar to the Russell 1000 Value Index. SSgA generally sells
stocks that no longer meet its selection criteria or that it believes otherwise
may adversely affect a Fund's performance relative to the index.

    SECURITIES OF FOREIGN ISSUERS.  Both Funds may invest in U.S. dollar
denominated securities of foreign companies that are traded on recognized U.S.
exchanges or in the U.S. over-the-counter market. PACE Large Company Value Fund
must limit these investments to 10% of its total assets, while Tax-Managed
Equity Fund may invest up to 25% of its total assets in these securities.

    DEBT SECURITIES.  Each Fund may invest in U.S. government bonds and
investment grade corporate bonds. Each Fund may invest up to 10% of its total
assets in convertible bonds that are not investment grade.

    DERIVATIVES.  The Funds have very similar policies with respect to the use
of derivatives relating to securities in which they normally invest. Each Fund
may (but is not required to) use options, futures and other derivatives as part
of its investment strategy or to help manage portfolio risks.

    TEMPORARY DEFENSIVE POSITIONS; CASH RESERVES.  Each Fund may take a
defensive position that is different from its normal investment strategy to
protect itself from adverse market conditions. This means that each Fund may
temporarily invest a larger-than-normal part, or even all, of its assets in cash
or money market instruments. In addition, each Fund may increase its cash
reserves to facilitate the transition to the investment style and strategies of
a new sub-adviser. Because these investments provide relatively low income, a
defensive or transitional position may not be consistent with achieving a Fund's
investment objective. PACE Large Company Value Fund is normally fully invested
in accordance with its investment objective and policies. However, with the
concurrence of Mitchell Hutchins, PACE Large Company Value Fund may take a
defensive position that is different from its normal investment strategy.

                                       7
<PAGE>
    Each Fund may invest to a limited extent in money market instruments as a
cash reserve for liquidity or other purposes.

    OTHER INVESTMENT POLICIES.  Each Fund may invest up to 15% of its net assets
in illiquid securities. Both Funds may purchase securities on a when-issued
basis or may purchase or sell securities for delayed delivery. Each Fund may
lend up to 33 1/3% of its total assets to qualified broker-dealers or
institutional investors. Each Fund may borrow money from banks or through
reverse repurchase agreements, but not in excess of 10% and 33 1/3% of their
respective total assets. Neither Fund may purchase securities while borrowings
in excess of 5% of its total assets are outstanding.

    PORTFOLIO TURNOVER.  PACE Large Company Value Fund may engage in frequent
trading to achieve its investment objective. Frequent trading may result in
portfolio turnover of 100% or more (high portfolio turnover). Frequent trading
may increase the portion of the Fund's capital gains that is realized for tax
purposes in any given year, which may increase the Fund's taxable distributions
that year. Frequent trading also may increase the portion of a Fund's realized
capital gains that is considered "short-term" for tax purposes. Shareholders
will pay higher taxes on distributions that represent net short-term capital
gains than they would pay on distributions that represent net long-term capital
gains. Frequent trading also may result in higher fund expenses due to
transaction costs. PACE Large Company Value Fund does not restrict the frequency
of trading to limit expenses or the tax effect that its distributions may have
on shareholders.

    Tax-Managed Equity Fund does not seek to use portfolio turnover to maximize
total after-tax return to its shareholders. The Fund may have higher portfolio
turnover if a sub-adviser believes that market conditions warrant or if a
sub-adviser believes that opportunities exist to sell securities and realize
capital losses that can be used to offset capital gains. Tax-Managed Equity Fund
does not restrict the frequency of trading to limit expenses.

    The portfolio turnover rates for Tax-Managed Equity Fund for the fiscal year
ended August 31, 2000 and for the period from December 14, 1998 through
August 31, 1999 were 77% and 47%, respectively, while the portfolio turnover
rates for PACE Large Company Value Fund's last two fiscal years ended July 31,
2000 and 1999, were 195% and 40%, respectively.

    Tax-Managed Equity Fund changed its investment management arrangements on
October 10, 2000 when ICAP and Westwood assumed responsibility for managing its
investment portfolio. These sub-advisers have realigned their respective
portions of the Fund's portfolio to reflect their proprietary investment
strategies. As a result, during the period immediately following October 10,
2000, the Fund experienced higher portfolio turnover than normal, which may
result in higher overall portfolio turnover for the current fiscal year, and the
Fund has realized higher net capital gain than otherwise would be the case. ICAP
and Westwood assumed responsibility for managing a portion of the investment
portfolio of PACE Large Company Value Fund on July 1, 2000, and SSgA assumed its
portfolio management responsibilities for that Fund on October 10, 2000. The
realignment of PACE Large Company Value Fund's portfolio to reflect the
proprietary investment strategies of the new sub-advisers increased the Fund's
portfolio turnover for its fiscal year ended July 31, 2000 and may also result
in a higher overall portfolio turnover for the current fiscal year than in the
fiscal years prior to July 31, 2000. However, the realignment of PACE Large
Company Value Fund's portfolio was substantially complete by October 31, 2000.

OPERATIONS OF PACE LARGE COMPANY VALUE FUND FOLLOWING THE REORGANIZATION

    It is not expected that PACE Large Company Value Fund will revise any of its
policies following the Reorganization to reflect those of Tax-Managed Equity
Fund. ICAP and Westwood have reviewed Tax-Managed Equity Fund's current
portfolio and determined that its holdings generally are compatible with PACE
Large Company Value Fund's portfolio. As a result, Mitchell Hutchins believes
that, if the Reorganization is approved, a substantial portion of Tax-Managed
Equity Fund's assets could be transferred to and held by PACE Large Company
Value Fund.

                                       8
<PAGE>
    As of December 22, 2000, none of Tax-Managed Equity Fund's portfolio
holdings were incompatible with PACE Large Company Value Fund's holdings or
would have to be sold if Tax-Managed Equity Fund's shareholders approve the
Reorganization. It is expected, however, that some of Tax-Managed Equity Fund's
holdings may not remain at the time of the Reorganization due to normal
portfolio turnover and also due to the continuing realignment of the Fund's
assets by the Fund's sub-advisers to reflect their proprietary investment
strategies.

PERFORMANCE

    The following bar chart and table provide information about the performance
of PACE Large Company Value Fund Class P shares and thus give some indication of
the risks of an investment in the Fund. The Fund's Class P shares were the only
outstanding class of shares during the periods shown.

    The bar chart shows how PACE Large Company Value Fund's performance has
varied from calendar year to calendar year. The bar chart does not reflect the
maximum annual PACE-SM- Select Advisors Program fee of 1.50% (which does not
apply to shares received in the Reorganization) or the effect of sales charges
or the higher expenses of PACE Large Company Value Fund's Class A, Class B and
Class C shares; if it did, the total returns shown would be lower.

    The first table that follows the bar chart shows the average annual total
returns over several time periods for the Fund's Class P shares. Class P shares
are not subject to the sales charges applicable to the Fund's Class A, Class B
and Class C shares or the higher expenses of these shares. The table does,
however, reflect the maximum annual PACE-SM- Select Advisors Program fee
applicable only to Class P shares. The program fee does not apply to shares
received in the Reorganization. A footnote to this table shows performance of
PACE Large Company Value Fund's Class P shares for the same periods without
deduction of this fee. Because all classes of shares invest in the same
portfolio of securities, their annual returns would differ only to the extent of
the different sales charges, expenses and program fees.

    The second table that follows the bar chart shows the average annual total
returns over several time periods for Tax-Managed Equity Fund's Class A,
Class B, Class C and Class Y shares. This table reflects sales charges and 12b-1
fees for Class A, Class B and Class C shares of the Fund. The Fund's Class Y
shares are not subject to any sales charges or 12b-1 fees and thus are most
comparable to the Class P shares of PACE Large Company Value Fund. The
performance of Tax-Managed Equity Fund's Class Y shares for the 1999 calendar
year can thus be compared to that of the Class P shares of PACE Large Company
Value Fund before deduction of the PACE-SM- Select Advisors Program fee, as
shown in the footnote to that Fund's table.

    The tables also compare each Fund's returns to returns of a broad-based
market index that is unmanaged and, therefore, does not reflect the deduction of
any fees or expenses. The two Funds have historically used different indices --
the Standard & Poor's 500 Composite Stock Price Index for Tax-Managed Equity
Fund and the Russell 1000 Value Index for PACE Large Company Value Fund. For
comparative purposes, the returns of both indices are shown for each Fund in the
tables below.

    Each Fund's past performance does not necessarily indicate how it will
perform in the future. This may be particularly true because, during the periods
shown, a different sub-adviser managed the assets of PACE Large Company Value
Fund and Mitchell Hutchins managed the assets of Tax-Managed Equity Fund
directly.

                                       9
<PAGE>
PACE LARGE COMPANY VALUE FUND -- TOTAL RETURN ON CLASS P SHARES (1996 IS THE
FUND'S FIRST FULL CALENDAR YEAR OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CALENDAR YEAR  TOTAL RETURN
<S>            <C>
1996                 25.11%
1997                 24.75%
1998                 18.36%
1999                (4.14)%
</TABLE>

Total return January 1 to September 30, 2000 -- (1.38)%

Best quarter during years shown: 4th quarter, 1998 -- 16.26%
Worst quarter during years shown: 3rd quarter, 1999 -- (14.40)%

PACE LARGE COMPANY VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS                                 CLASS P   RUSSELL 1000
(INCEPTION DATE)                     (8/24/95)  VALUE INDEX   S&P 500 INDEX
----------------                     ---------  ------------  -------------
<S>                                  <C>        <C>           <C>
One Year ..........................    (5.57)%       7.35%         21.03%
Life of Class......................    15.20%       20.64%         27.03%
</TABLE>

-------------------
*  The above performance reflects the deduction of the maximum annual PACE-SM-
   Select Advisors Program fee of 1.50% (which does not apply to shares received
   in the Reorganization). If the program fee were not deducted, the average
   annual total returns of the Fund's Class P shares would be (4.14)% for the
   year ended December 31, 1999 and 16.94% for "Life of Class."

TAX-MANAGED EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)

<TABLE>
<CAPTION>
CLASS                                                     CLASS A     CLASS B     CLASS C     CLASS Y     S&P 500   RUSSELL 1000
(INCEPTION DATE)                                         (12/14/98)  (12/14/98)  (12/14/98)  (12/14/98)    INDEX    VALUE INDEX
----------------                                         ----------  ----------  ----------  ----------   -------   ------------
<S>                                                      <C>         <C>         <C>         <C>         <C>        <C>
One Year...............................................      5.54%       4.62%       8.62%      10.16%     21.03%        7.35%
Life of Class..........................................      9.48%       8.81%      13.55%      14.09%     25.76%       10.12%
</TABLE>

SALES CHARGES

    No sales charges apply when Tax-Managed Equity Fund shareholders receive
shares of PACE Large Company Value Fund in connection with the Reorganization.

                                       10
<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS

    Both Funds normally declare and pay dividends and distribute substantially
all of their gains, if any, annually. Classes with higher expenses are expected
to have lower dividends. For example, Class B and Class C shares are expected to
have the lowest dividends of any class of a Fund's shares, while Class Y shares
(and, for PACE Large Company Value Fund, Class P shares) would have the highest
dividends.

    As a shareholder of PACE Large Company Value Fund, you will receive
dividends in additional shares of the Fund unless you elect to receive them in
cash. Your current dividend distribution election for Tax-Managed Equity Fund
will remain the same after the Reorganization. Contact your Financial Advisor at
PaineWebber if you prefer to receive dividends in cash.

    On or before the Closing Date, Tax-Managed Equity Fund will distribute
substantially all of its undistributed net investment income, net capital gain
and net short-term capital gain, if any, in order to continue to maintain its
tax status as a regulated investment company.

TAXES

    The dividends that you receive from either Fund generally are subject to
federal income tax regardless of whether you receive them in additional Fund
shares or in cash. If you hold Fund shares through a tax-exempt account or plan,
such as an IRA or 401(k) plan, dividends on your shares generally will not be
subject to tax.

    When you sell Fund shares, you generally will be subject to federal income
tax on any gain you realize. If you exchange a Fund's shares for shares of
another PaineWebber mutual fund, the transaction will be treated as a sale of
the first fund's shares, and any gain will be subject to federal income tax.

    Any distribution of capital gains may be taxed at a lower rate than ordinary
income, depending on whether the Fund held the assets that generated the gains
for more than 12 months. A Fund will tell you how you should treat its dividends
for tax purposes.

           FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING SHARES OF
                         PACE LARGE COMPANY VALUE FUND

FLEXIBLE PRICING

    PACE Large Company Value Fund offers four new classes of shares -- Class A,
Class B, Class C and Class Y -- established prior to the Reorganization. The
four new classes of shares of PACE Large Company Value Fund and the procedures
for buying, selling and exchanging these shares, as described below, are
substantially identical to the corresponding classes of shares and related
procedures of Tax-Managed Equity Fund. Prior to November 27, 2000, PACE Large
Company Value Fund offered only Class P shares, which are available only to
participants in the PaineWebber PACE-SM- Select Advisors Program.

                                       11
<PAGE>
    No sales charges apply when Tax-Managed Equity Fund shareholders receive
Class A, Class B, Class C or Class Y shares of PACE Large Company Value Fund as
part of the Reorganization. PACE Large Company Value Fund is offering its four
new classes of shares to the general public prior to the Reorganization.
Class Y shares are only available to certain types of investors. Class A,
Class B and Class C shares purchased other than as part of the Reorganization
will be subject to the sales charges described below. In addition, each class
has different ongoing expenses.

    PACE Large Company Value Fund has adopted a plan under Rule 12b-1 governing
its Class A, Class B and Class C shares that allows it to pay service fees for
providing services to shareholders and (for Class B and Class C shares)
distribution fees for the sale of its shares. The terms of these plans are
substantially identical to the terms of the corresponding plans now in place for
Tax-Managed Equity Fund's Class A, Class B and Class C shares. Because the 12b-1
distribution fees for Class B and Class C shares are paid out of the Fund's
assets on an ongoing basis, over time they will increase the cost of your
investment and may cost you more than if you paid a front-end sales charge.

CLASS A SHARES

    Class A shares have a front-end sales charge that is included in the
offering price of the Class A shares. This sales charge is not invested in the
Fund. Class A shares pay an annual 12b-1 service fee of 0.25% of average net
assets, but they pay no 12b-1 distribution fees. The ongoing expenses for
Class A shares are lower than for Class B and Class C shares.

    The Class A sales charges for both Funds are described in the following
table.

CLASS A SALES CHARGES

<TABLE>
<CAPTION>
                                                                          REALLOWANCE TO SELECTED
                                      SALES CHARGE AS A PERCENTAGE OF:     DEALERS AS PERCENTAGE
AMOUNT OF INVESTMENT                 OFFERING PRICE  NET AMOUNT INVESTED    OF OFFERING PRICE*
--------------------                 --------------  -------------------  -----------------------
<S>                                  <C>             <C>                  <C>
Less than $50,000..................         4.50%              4.71%                   4.25%
$50,000 to $99,999.................         4.00               4.17                    3.75
$100,000 to $249,999...............         3.50               3.63                    3.25
$250,000 to $499,999...............         2.50               2.56                    2.25
$500,000 to $999,999...............         1.75               1.78                    1.50
$1,000,000 and over (1) ...........         None               None                    1.00(2)
</TABLE>

-------------------

(1)  A contingent deferred sales charge of 1% of the shares' offering price or
     the net asset value at the time of sale by the shareholder, whichever is
     less, is charged on sales of shares made within one year of the purchase
     date. Class A shares purchased through the reinvestment of dividends are
     not subject to this 1% charge. Withdrawals in the first year after purchase
     of up to 12% of the value of the Fund account under the Fund's Systematic
     Withdrawal Plan are not subject to this charge.
(2)  Mitchell Hutchins pays 1% to the dealer.
  *  For an initial period ending on or about December 29, 2000, Mitchell
     Hutchins will reallow the full amount of the sales charge to selected
     dealers.

SALES CHARGE REDUCTIONS AND WAIVERS.  You may qualify for a lower sales charge
if you already own Class A shares of a PaineWebber or PaineWebber PACE mutual
fund. You can combine the value of Class A shares that you own in other
PaineWebber or PaineWebber PACE funds and the purchase amount of the Class A
shares of the PaineWebber or PaineWebber PACE fund that you are buying.

    You may also qualify for a lower sales charge if you combine your purchases
with those of:

    -  your spouse, parents or children under age 21;

    -  your Individual Retirement Accounts (IRAs);

    -  certain employee benefit plans, including 401(k) plans;

    -  a company that you control;

                                       12
<PAGE>
    -  a trust that you created;

    -  Uniform Transfers to Minors Act/Uniform Gifts to Minors Act accounts
       created by you or by a group of investors for your children; or

    -  accounts with the same adviser.

    You may qualify for a complete waiver of the sales charge if you:

    -  Are an employee of PaineWebber or its affiliates or the spouse, parent or
       child under age 21 of a PaineWebber employee;

    -  Buy these shares through a PaineWebber Financial Advisor who was formerly
       employed as an investment executive with a competing brokerage firm that
       was registered as a broker-dealer with the SEC, and

        --  you were the Financial Advisor's client at the competing brokerage
            firm;

        --  within 90 days of buying shares in a fund, you sell shares of one or
            more mutual funds that were principally underwritten by the
            competing brokerage firm or its affiliates, and you either paid a
            sales charge to buy those shares, pay a contingent deferred sales
            charge when selling them or held those shares until the contingent
            deferred sales charge was waived; and

        --  you purchase an amount that does not exceed the total amount of
            money you received from the sale of the other mutual fund;

    -  Acquire these shares through the reinvestment of dividends of a
       PaineWebber unit investment trust;

    -  Are a 401(k) or 403(b) qualified employee benefit plan with 50 or more
       eligible employees in the plan or at least $1 million in assets;

    -  Are a participant in the PaineWebber Members Only-SM- Program. For
       investments made pursuant to this waiver, Mitchell Hutchins may make
       payments out of its own resources to PaineWebber and to participating
       membership organizations in a total amount not to exceed 1% of the amount
       invested; or

    -  Acquire these shares through a PaineWebber InsightOne-SM- Program
       brokerage account.

CLASS B SHARES

    Class B shares have a contingent deferred sales charge. When you purchase
Class B shares, we invest 100% of your purchase in Fund shares. However, you may
have to pay the deferred sales charge when you sell your Fund shares, depending
on how long you own the shares.

    Class B shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
If you hold your Class B shares for six years, they will automatically convert
to Class A shares, which have lower ongoing expenses.

    If you sell Class B shares before the end of six years, you will pay a
deferred sales charge. We calculate the deferred sales charge by multiplying the
lesser of the net asset value of the Class B shares at the time of purchase or
the net asset value at the time of sale by the percentage shown below:

<TABLE>
<CAPTION>
                                                     PERCENTAGE BY WHICH
IF YOU SELL                                         THE SHARES' NET ASSET
SHARES WITHIN:                                       VALUE IS MULTIPLIED:
--------------                                      ---------------------
<S>                                                 <C>
1st year since purchase...........................                  5%
2nd year since purchase...........................                  4
3rd year since purchase...........................                  3
4th year since purchase...........................                  2
5th year since purchase...........................                  2
6th year since purchase...........................                  1
7th year since purchase...........................               None
</TABLE>

                                       13
<PAGE>
    We will not impose the deferred sales charge on Class B shares purchased
through the reinvestment of dividends or on withdrawals in any year of up to 12%
of the value of your Class B shares under the Systematic Withdrawal Plan.

    For purposes of determining your deferred sales charge and when to convert
your Class B shares to Class A shares, the holding period for the Class B shares
of PACE Large Company Value Fund that you receive in connection with the
Reorganization will include the period for which you held the corresponding
Class B shares of Tax-Managed Equity Fund and any other PaineWebber fund whose
shares you exchanged for Class B shares of Tax-Managed Equity Fund.

    To minimize your deferred sales charge, we will assume that you are selling:

    -  First, Class B shares representing reinvested dividends, and

    -  Second, Class B shares that you have owned the longest.

SALES CHARGE WAIVERS.  You may qualify for a waiver of the deferred sales charge
on a sale of shares if:

    -  You participate in the Systematic Withdrawal Plan;

    -  You are older than 59-1/2 and are selling shares to take a distribution
       from certain types of retirement plans;

    -  You receive a tax-free return of an excess IRA contribution;

    -  You receive a tax-qualified retirement plan distribution following
       retirement;

    -  The shares are sold within one year of your death and you owned the
       shares either (1) as the sole shareholder or (2) with your spouse as a
       joint tenant with the right of survivorship; or

    -  The shares are held in trust and the death of the trustee requires
       liquidation of the trust.

CLASS C SHARES

    Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of your
purchase in Fund shares.

    Class C shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
Class C shares do not convert to another class of shares. This means that you
will pay the 12b-1 fees for as long as you own your shares.

    Class C shares also have a contingent deferred sales charge. You may have to
pay the deferred sales charge if you sell your shares within one year of the
date you purchased them. We calculate the deferred sales charge on sales of
Class C shares by multiplying 1.00% by the lesser of the net asset value of the
Class C shares at the time of purchase or the net asset value at the time of
sale. We will not impose the deferred sales charge on Class C shares purchased
through the reinvestment of dividends or on withdrawals in the first year after
purchase, of up to 12% of the value of your Class C shares under the Systematic
Withdrawal Plan.

    For purposes of determining your deferred sales charge, the holding period
for the Class C shares of PACE Large Company Value Fund that you receive in
connection with the Reorganization will include the period for which you held
the corresponding Class C shares of Tax-Managed Equity Fund and any other
PaineWebber fund whose shares you exchanged for shares of Tax-Managed Equity
Fund.

    You may be eligible to sell your shares without paying a contingent deferred
sales charge if you are a 401(k) or 403(b) qualified employee benefit plan with
50 or more eligible employees in the plan or at least $1 million in assets.

NOTE ON SALES CHARGE WAIVERS FOR CLASS A, CLASS B AND CLASS C SHARES:

    If you think that you qualify for any of these sales charge waivers
described above, you will need to provide documentation to PaineWebber or the
Fund. For more information, you should contact your PaineWebber Financial
Advisor or correspondent firm or call (800) 647-1568. If you want information on

                                       14
<PAGE>
the Fund's Systematic Withdrawal Plan, see the SAI or contact your PaineWebber
Financial Advisor or correspondent firm.

CLASS Y SHARES

    Class Y shares have no sales charge. Only specific types of investors can
purchase Class Y shares. You may be eligible to purchase Class Y shares if you:

    -  Buy shares through PaineWebber's PACE-SM- Multi Advisor Program;

    -  Buy $10 million or more of PaineWebber fund shares at any one time;

    -  Are a qualified retirement plan with 5,000 or more eligible employees or
       $50 million in assets;

    -  Are a corporation, bank, trust company, insurance company, pension fund,
       employee benefit plan, professional firm, trust, estate or educational,
       religious or charitable organization with 5,000 or more employees or with
       over $50 million in investable assets; or

    -  Are an investment company advised by PaineWebber or an affiliate of
       PaineWebber.

    The trustee of PaineWebber's 401(k) Plus Plan for its employees is also
eligible to purchase Class Y shares on behalf of that Plan.

    Class Y shares do not pay ongoing distribution or service fees or sales
charges. The ongoing expenses for Class Y shares are lower than the ongoing
expenses of Class A, Class B or Class C shares.

BUYING SHARES

    If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase Fund shares through your Financial Advisor. Otherwise,
you can invest in the Fund through the Fund's transfer agent, PFPC Inc. You can
obtain an application by calling 1-800-647-1568. You must complete and sign the
application and mail it, along with a check, to:

    PFPC Inc.
    Attn.: PaineWebber Mutual Funds
    P.O. Box 8950
    Wilmington, DE 19899.

    You do not have to complete an application when you make additional
investments in the Fund.

    The Fund and Mitchell Hutchins reserve the right to reject a purchase order
or suspend the offering of shares.

MINIMUM INVESTMENTS

<TABLE>
<S>                                                 <C>
To open an account................................  $1,000
To add to an account..............................  $100
</TABLE>

    The Fund may waive or reduce these amounts for:

    -  Employees of PaineWebber or its affiliates; or

    -  Participants in certain pension plans, retirement accounts, unaffiliated
       investment programs or the Fund's automatic investment plans.

FREQUENT TRADING.  The interests of the Fund's long-term shareholders and its
ability to manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market fluctuations--also
known as "market timing." When large dollar amounts are involved, the Fund may
have difficulty implementing long-term investment strategies, because it cannot
predict how much cash it will have to invest. Market timing also may force the
Fund to sell portfolio securities at disadvantageous times to raise the cash
needed to buy a market timer's fund shares. These factors may hurt the Fund's
performance and its shareholders. When Mitchell Hutchins believes frequent
trading would have a disruptive effect on the Fund's ability to manage its
investments, Mitchell Hutchins and the Fund may reject purchase orders and
exchanges into the Fund by any person, group or account that

                                       15
<PAGE>
Mitchell Hutchins believes to be a market timer. The Fund may notify the market
timer that a purchase order or an exchange has been rejected after the day the
order is placed.

SELLING SHARES

    You can sell your Fund shares at any time. If you own more than one class of
shares, you should specify which class you want to sell. If you do not, the Fund
will assume that you want to sell shares in the following order: Class A, then
Class C, then Class B and last, Class Y.

    If you want to sell shares that you purchased recently, the Fund may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.

    If you have an account with PaineWebber or a PaineWebber correspondent firm,
you can sell shares by contacting your Financial Advisor.

    If you do not have an account at PaineWebber or a correspondent firm, and
you bought your shares through the transfer agent, you can sell your shares by
writing to the Fund's transfer agent. Your letter must include:

    -  Your name and address;

    -  The Fund's name;

    -  The Fund account number;

    -  The dollar amount or number of shares you want to sell; and

    -  A guarantee of each registered owner's signature. A signature guarantee
       may be obtained from a financial institution, broker, dealer or clearing
       agency that is a participant in one of the medallion programs recognized
       by the Securities Transfer Agents Association. These are: Securities
       Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion
       Program (SEMP) and the New York Stock Exchange Medallion Signature
       Program (MSP). The Fund will not accept signature guarantees that are not
       a part of these programs.

    Mail the letter to:

    PFPC Inc.
    Attn.: PaineWebber Mutual Funds
    P.O. Box 8950
    Wilmington, DE 19899.

    If you sell Class A shares and then repurchase Class A shares of the Fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.

    It costs the Fund money to maintain shareholder accounts. Therefore, the
Fund reserves the right to repurchase all shares in any account that has a net
asset value of less than $500. If the Fund elects to do this with your account,
it will notify you that you can increase the amount invested to $500 or more
within 60 days. The Fund will not repurchase shares in accounts that fall below
$500 solely because of a decrease in the Fund's net asset value.

EXCHANGING SHARES

    You may exchange Class A, Class B or Class C shares of the Fund for shares
of the same class of the other PACE funds or of PaineWebber Money Market Fund.
(It is expected that shareholders will also be able to exchange Class A,
Class B or Class C shares of a PACE fund for shares of the same class of certain
other PaineWebber mutual funds beginning on or about March 1, 2001.) You may not
exchange Class Y shares.

    You will not pay either a front-end sales charge or a deferred sales charge
when you exchange shares. However, you may have to pay a deferred sales charge
if you later sell the shares you acquired in the exchange. The Fund will use the
date that you purchased the shares in the first fund to determine whether you
must pay a deferred sales charge when you sell the shares in the acquired fund.

                                       16
<PAGE>
    You may not be able to exchange your shares if your exchange is not as large
as the minimum investment amount in that other fund.

    You may exchange shares of one fund for shares of another fund only after
the first purchase has settled and the first fund has received your payment.

PAINEWEBBER AND CORRESPONDENT FIRM CLIENTS.  If you bought your shares through
PaineWebber or a correspondent firm, you may exchange your shares by placing an
order with your Financial Advisor.

OTHER INVESTORS.  If you are not a PaineWebber or correspondent firm client, you
may exchange your shares by writing to the Fund's transfer agent. You must
include:

    -  Your name and address;

    -  The name of the fund whose shares you are selling and the name of the
       fund whose shares you want to buy;

    -  Your account number;

    -  How much you are exchanging (by dollar amount or by number of shares to
       be sold); and

    -  A guarantee of your signature. (See "Selling Shares" for information on
       obtaining a signature guarantee.)

    Mail the letter to:

    PFPC Inc.
    Attn.: PaineWebber Mutual Funds
    P.O. Box 8950
    Wilmington, DE 19899.

    The Fund may modify or terminate the exchange privilege at any time.

PRICING AND VALUATION

    The price at which you may buy, sell or exchange Fund shares is based on net
asset value per share. The Fund calculates net asset value on days that the New
York Stock Exchange, Inc. ("NYSE") is open. The Fund calculates net asset value
separately for each class as of the close of regular trading on the NYSE
(generally, 4:00 p.m., Eastern time). The NYSE normally is not open on most
national holidays and on Good Friday, and the Fund does not price its shares on
these days. If trading on the NYSE is halted for the day before 4:00  p.m.,
Eastern time, the Fund's net asset value per share will be calculated as of the
time trading was halted.

    Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the Fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for making sure that your order is promptly sent to the Fund.

    You should keep in mind that a front-end sales charge may be applied to your
purchase if you buy Class A shares. A deferred sales charge may be applied when
you sell Class B or Class C shares.

                                       17
<PAGE>
    The Fund calculates its net asset value based on the current market value
for its portfolio securities. The Fund normally obtains market values for its
securities from independent pricing services that use reported last sales
prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. If a market value is
not available from an independent pricing source for a particular security, that
security is valued at a fair value determined by or under the direction of the
Fund's board. The Fund normally uses the amortized cost method to value bonds
that will mature in 60 days or less. Judgment plays a greater role in valuing
thinly traded securities, including many lower-rated bonds, because there is
less reliable, objective data available.

                                   MANAGEMENT

INVESTMENT MANAGER AND INVESTMENT ADVISER

    Mitchell Hutchins is the manager and administrator of both PACE Large
Company Value Fund and Tax-Managed Equity Fund. Mitchell Hutchins is located at
51 West 52nd Street, New York, New York 10019-6114, and is a wholly owned asset
management subsidiary of PaineWebber Incorporated, which is a wholly owned
indirect subsidiary of UBS AG. UBS AG, with headquarters in Zurich, Switzerland,
is an internationally diversified organization with operations in many areas of
the financial services industry. On October 31, 2000, Mitchell Hutchins was
adviser or sub-adviser of 31 investment companies with 75 separate portfolios
and aggregate assets of approximately $58.3 billion.

    As investment manager for PACE Large Company Value Fund, Mitchell Hutchins
recommends sub-advisers to the Board of PACE Trust to manage the Fund's
investments and monitors and reviews the performance of those sub-advisers.

    As investment manager for Tax-Managed Equity Fund, Mitchell Hutchins
recommends sub-advisers to the Board of Managed Investments Trust and monitors
and reviews the performance of those sub-advisers. Since October 10, 2000,
Mitchell Hutchins and the sub-advisers have provided investment management
services to the Fund under interim contracts approved by the Board of Managed
Investments Trust. Prior to October 10, 2000, Mitchell Hutchins managed
Tax-Managed Equity Fund's assets directly.

    Both PACE Trust and Managed Investments Trust have received exemptive orders
from the SEC to permit Mitchell Hutchins (subject to Board approval) to select
and replace sub-advisers and to amend the sub-advisory contracts between
Mitchell Hutchins and the investment advisers without obtaining shareholder
approval.

SUB-ADVISERS

    ICAP, Westwood and SSgA manage the assets of PACE Large Company Value Fund
allocated to them by Mitchell Hutchins. Two of the same sub-advisers -- ICAP and
Westwood -- manage the assets of Tax-Managed Equity Fund allocated to them by
Mitchell Hutchins. ICAP, located at 225 West Wacker Drive, Suite 2400, Chicago,
Illinois 60606-1229, has been in the investment management business since 1970.
As of September 30, 2000, ICAP had approximately $14.4 billion in assets under
management. ICAP uses a team approach in advising its share of each Fund's
assets. ICAP has held its responsibilities for PACE Large Company Value Fund
since July 1, 2000 and for Tax-Managed Equity Fund since October 10, 2000.

    Westwood, located at 300 Crescent Court, Suite 1300, Dallas, Texas 75201,
has been in the investment management business since 1983. As of September 30,
2000, Westwood had approximately $3.2 billion in assets under management.
Susan M. Byrne, president of Westwood since 1983, is the lead portfolio manager.
She and a team of five research analysts are primarily responsible for the
day-to-day management of Westwood's share of each Fund's assets. Westwood has
held its responsibilities for PACE Large Company Value Fund since July 1, 2000
and for Tax-Managed Equity Fund since October 10, 2000.

    SSgA, located at Two International Place, Boston, Massachusetts 02110, is
the investment management division of State Street Bank and Trust Company. As of
September 30, 2000, SSgA had approximately $741 billion in assets under
management. SSgA uses a team approach in the day-to-day

                                       18
<PAGE>
management of its share of PACE Large Company Value Fund's assets. SSgA has held
its responsibilities for PACE Large Company Value Fund since October 10, 2000.

ADVISORY FEES AND FUND EXPENSES

    PACE Large Company Value Fund paid fees to Mitchell Hutchins for management
and administration services for the Fund's most recent fiscal year at the
combined annual contract rate of 0.80% of average daily net assets. This
combined fee includes an annual contract rate of 0.60% for investment management
services and 0.20% for administrative services, both expressed as a percentage
of the Fund's average daily net assets. Tax-Managed Equity Fund pays fees to
Mitchell Hutchins for management and administration services at the annual
contract rate of 0.75% of the Fund's average daily net assets. During the fiscal
year ended August 31, 2000, Tax-Managed Equity Fund paid fees to Mitchell
Hutchins at the lower effective annual rate of 0.72% of the Fund's average daily
net assets because Mitchell Hutchins waived a portion of its fee.

    The management and administrative services fees paid by PACE Large Company
Value Fund to Mitchell Hutchins are greater than those paid by Tax-Managed
Equity Fund. However, Mitchell Hutchins anticipates that shareholders of each
class of shares of Tax-Managed Equity Fund who will become shareholders of the
corresponding class of shares of PACE Large Company Value Fund will be subject
to total annual operating expenses that are lower than the expenses they
currently pay as shareholders of Tax-Managed Equity Fund due to economies of
scale. The overall operating expenses of PACE Large Company Value Fund are also
subject to a written management fee waiver agreement between PACE Large Company
Value Fund and Mitchell Hutchins, which will remain in effect through
December 1, 2002. Even absent that agreement, however, it is expected that the
overall operating expenses of PACE Large Company Value Fund immediately
following the Reorganization would be lower than the current expenses of
Tax-Managed Equity Fund.

                ADDITIONAL INFORMATION ABOUT THE REORGANIZATION

REASONS FOR THE REORGANIZATION

    Mitchell Hutchins and Managed Investments Trust's Board approved the
Reorganization at a meeting held on October 6, 2000. As described more fully
below, the Board and Mitchell Hutchins believe that Tax-Managed Equity Fund's
shareholders will benefit from the Reorganization. The relatively low and
declining asset level for Tax-Managed Equity Fund makes it difficult to manage
efficiently and its expenses have remained high. Although PACE Large Company
Value Fund has a different investment objective because it does not seek maximum
after-tax return for its shareholders, it is similar to Tax-Managed Equity Fund
in that it also invests primarily in stocks of U.S. companies with large market
capitalizations and follows a value-oriented approach in investment selection.
In addition, the combined Fund would have a larger asset base, which should
provide greater opportunities for diversifying investments and realizing
economies of scale.

    At the meeting of Managed Investments Trust's Board on October 6, 2000 and
in a series of prior meetings and presentations, Mitchell Hutchins explained to
the Board that it had undertaken an extensive review of whether the best
interests of shareholders of a number of PaineWebber funds, including Tax-
Managed Equity Fund, would be served by continuing to operate the funds under
their current arrangements. For Tax-Managed Equity Fund, Mitchell Hutchins'
review included a possible restructuring of the Fund's investment management
arrangements and a possible reorganization into another PaineWebber fund.

    Mitchell Hutchins noted that the assets of Tax-Managed Equity Fund, which
started operations in December 1998, have never been very great and have been
generally declining over the past 14 months. As of November 30, 2000, the Fund's
net assets were approximately $39.6 million. As a result of this relatively low
and declining asset level, the Fund has been difficult to manage efficiently and
its expenses have remained relatively high. Mitchell Hutchins noted that
although Tax-Managed Equity Fund was not required to invest in companies with
any minimum market capitalizations, it had since its inception

                                       19
<PAGE>
invested primarily in stocks of companies with large market capitalizations.
Mitchell Hutchins explained that although PACE Large Company Value Fund has a
different investment objective (because it is not required to actively seek to
maximize after-tax return to its shareholders), it also invested primarily in
stocks of companies with large market capitalizations and offered a much larger
asset base. In addition, both Funds follow a value-oriented approach in their
selection of investments. Mitchell Hutchins noted that Tax-Managed Equity Fund
was the only PaineWebber fund that was required to maximize afer-tax return for
its shareholders, so that there were no potential merger partners that could
preserve this feature. (See "Comparison of the Funds" above for a more complete
description of the investment objectives, policies and risks of the Funds.)

    Mitchell Hutchins stated its belief that the Reorganization would likely
benefit Tax-Managed Equity Fund's shareholders because the combined Fund would
allow them to continue to invest in the same types of large capitalization
companies that have been part of Tax-Managed Equity Fund's portfolio since its
inception and continue their investment in a fund that follows a value-oriented
style. Mitchell Hutchins also believes that the larger asset base of the
combined Fund would permit the shareholders of Tax-Managed Equity Fund greater
opportunities to diversify investments and realize economies of scale. Mitchell
Hutchins noted that the investment management and administrative services fees
currently paid by PACE Large Company Value Fund are greater than those currently
paid by Tax-Managed Equity Fund. However, Mitchell Hutchins informed the Board
that it anticipated that current shareholders of each class of shares of
Tax-Managed Equity Fund who will become shareholders of the combined Fund if the
Reorganization is approved will be subject to total annual operating expenses
that are lower than the expenses they currently pay as shareholders of
Tax-Managed Equity Fund due to economies of scale.

    Mitchell Hutchins also informed the Board of Managed Investments Trust that
it had entered into a written management fee waiver agreement with PACE Large
Company Value Fund to waive its management fee through December 1, 2002 to the
extent necessary to reflect the lower overall fees paid to the Fund's
sub-advisers as a result of the lower sub-advisory fee paid to SSgA. In
addition, Mitchell Hutchins informed the Board that it had entered into another
written agreement with PACE Large Company Value Fund that becomes effective if
the reorganization of PaineWebber Growth and Income Fund and PACE Large Company
Value Fund takes place. Under that agreement, Mitchell Hutchins is contractually
obligated to waive its management fee and/or reimburse the Fund to the extent
that its total annual operating expenses for each class of shares through
December 1, 2002 would otherwise exceed the current overall operating expenses
of the corresponding class of shares of PaineWebber Growth and Income Fund. It
is not presently expected that Mitchell Hutchins would be required to waive its
management fee or reimburse expenses under this agreement because the expenses
of PACE Large Company Value Fund immediately after the reorganization are
expected to be the same or slightly lower than the current operating expenses of
PaineWebber Growth and Income Fund as a result of the management fee waiver
agreement described above. Mitchell Hutchins noted, however, that even absent
these agreements, it is expected that the overall operating expenses of PACE
Large Company Value Fund immediately following the Reorganization would be lower
than the current expenses of Tax-Managed Equity Fund. (See "Comparative Fee
Table" above for a more complete description of the fees and expenses of the
Funds, both before and after the Reorganization.)

    Mitchell Hutchins then proposed immediate changes in the investment
management arrangements for Tax-Managed Equity Fund. Mitchell Hutchins advised
the Board of Managed Investments Trust of its belief that the proposed
investment management changes represented its judgment of the best management
structure for the Fund. Mitchell Hutchins noted its experience in selecting and
monitoring unaffiliated sub-advisers, particularly with respect to the various
different series of PACE Trust, all but one of which are managed by
sub-advisers. Mitchell Hutchins recommended to the Board of Managed Investments
Trust that two of the same sub-advisers that manage PACE Large Company Value
Fund -- ICAP and Westwood -- be retained on an interim basis to manage the
assets of Tax-Managed Equity Fund, with Mitchell Hutchins having responsibility
for allocating the Fund's assets between the two sub-advisers. After
consideration of all the information presented by Mitchell Hutchins, inquiries
into the ability and resources of each proposed sub-adviser to provide
appropriate investment management services

                                       20
<PAGE>
for its allocated portion of Tax-Managed Equity Fund's assets and interviews
with personnel of each proposed sub-adviser, Managed Investments Trust's Board
determined to implement the new investment management arrangements effective
October 10, 2000.

    To implement the new investment management arrangements for Tax-Managed
Equity Fund, the Board of Managed Investments Trust, effective October 10, 2000,
terminated the existing investment advisory and administration contract between
the Fund and Mitchell Hutchins and approved a new interim contract with Mitchell
Hutchins and an interim sub-advisory contract between Mitchell Hutchins and each
sub-adviser. Under the Interim Management and Administration Contract ("Interim
Management Contract"), Mitchell Hutchins serves as investment manager for
Tax-Managed Equity Fund and provides portfolio management oversight as opposed
to direct management of the Fund's investments. Mitchell Hutchins provides
portfolio management oversight principally by performing initial reviews of
prospective sub-advisers and supervising and monitoring the performance of the
sub-advisers thereafter. The Interim Management Contract and interim
sub-advisory contracts will terminate on the earlier of 150 days from their
effective date or the Closing Date of the Reorganization.

    Finally, Mitchell Hutchins reviewed with the Board the principal terms of
the Plan. Mitchell Hutchins informed the Board that the Reorganization would be
tax-free to Tax-Managed Equity Fund and its shareholders, that shareholders of
the combined Fund after the Reorganization could continue to exchange into other
PaineWebber open-end funds without having to pay an additional sales load should
their investment priorities change, and that no sales charges would be imposed
on any PACE Large Company Value Fund shares issued in connection with the
Reorganization. Furthermore, Mitchell Hutchins informed the Board of Managed
Investments Trust that, for purposes of calculating the contingent deferred
sales charge, the holding period for the Class B and Class C shares distributed
to Class B and Class C shareholders of Tax-Managed Equity Fund would include the
holding period for the shares of Tax-Managed Equity Fund and any other
PaineWebber fund shares of the same class that were exchanged for shares of
Tax-Managed Equity Fund.

    As part of its considerations, the Board of Managed Investments Trust
examined a number of factors with respect to the Reorganization, including:
(1) the compatibility of the Funds' investment objectives, policies and
restrictions, including the absence of any requirement that PACE Large Company
Value Fund actively seek to maximize after-tax return to its shareholders;
(2) the relatively small size and generally declining assets of Tax-Managed
Equity Fund; (3) the Funds' respective investment performances; (4) the likely
impact of the Reorganization on the expense ratio of PACE Large Company Value
Fund and that expense ratio relative to Tax-Managed Equity Fund's current
expense ratio; (5) that Mitchell Hutchins would bear the costs of the
Reorganization; (6) the compatibility of the Funds' portfolio holdings and the
effect on Tax-Managed Equity Fund and its shareholders of any realignment of its
portfolio in connection with the Reorganization; (7) the tax consequences of the
Reorganization; (8) the potential benefits of the Reorganization to other
persons, including Mitchell Hutchins and its affiliates; (9) Mitchell Hutchins'
assessment that the proposed Reorganization will be beneficial to the
shareholders of Tax-Managed Equity Fund and will not dilute their interests;
(10) the advisory arrangements in place for the Funds and the level and quality
of investment advisory services provided or to be provided by Mitchell Hutchins,
ICAP, Westwood and SSgA; and (11) the terms of the proposed Plan.

    On the basis of the information provided to it and its evaluation of that
information, the Board of Managed Investments Trust, including a majority of its
Independent Trustees, determined that the Reorganization would be in the best
interests of Tax-Managed Equity Fund and that the interests of existing
Tax-Managed Equity Fund shareholders would not be diluted as a result of the
Reorganization. THEREFORE, THE BOARD OF MANAGED INVESTMENTS TRUST UNANIMOUSLY
APPROVED THE REORGANIZATION AND RECOMMENDED THE APPROVAL OF THE PLAN BY THE
SHAREHOLDERS OF TAX-MANAGED EQUITY FUND AT THE MEETING.

TERMS OF THE REORGANIZATION

    The terms and conditions under which the Reorganization may be consummated
are set forth in the Plan. Significant provisions of the Plan are summarized
below; however, this summary is qualified in its

                                       21
<PAGE>
entirety by reference to the Plan, a copy of the form of which is attached as
Appendix A to this Proxy Statement/Prospectus.

    The Plan contemplates (1) PACE Large Company Value Fund's acquiring on the
Closing Date all the assets of Tax-Managed Equity Fund in exchange solely for
PACE Large Company Value Fund shares and PACE Large Company Value Fund's
assumption of all of Tax-Managed Equity Fund's stated liabilities and (2) the
distribution of those shares to Tax-Managed Equity Fund shareholders.
Tax-Managed Equity Fund's assets include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights of
action, rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on its books and other
property owned by it as of the close of business on the Closing Date ("Effective
Time") (collectively, the "Assets"). PACE Large Company Value Fund will assume
from Tax-Managed Equity Fund all its liabilities, debts, obligations and duties
of whatever kind or nature, whether absolute, accrued, contingent, or otherwise,
whether or not arising in the ordinary course of business, and whether or not
specifically referred to in the Plan, but only to the extent disclosed or
provided for in Tax-Managed Equity Fund's most recent annual financial
statements, or incurred by Tax-Managed Equity Fund subsequent to the date of
those financial statements and disclosed in writing to and accepted by PACE
Trust (collectively, the "Liabilities"). Tax-Managed Equity Fund agrees in the
Plan to use its best efforts to discharge all of its known Liabilities prior to
the Effective Time.

    The value of the Assets to be acquired, and the amount of the Liabilities to
be assumed, by PACE Large Company Value Fund and the NAV per share of each class
of PACE Large Company Value Fund shares will be determined as of the close of
regular trading on the NYSE on the Closing Date ("Valuation Time"), using the
applicable valuation procedures described in PACE Large Company Value Fund's
current Prospectus and SAI. These procedures are identical to those used by
Tax-Managed Equity Fund and described in its Prospectus and SAI. Tax-Managed
Equity Fund's NAV will be the value of the Assets to be acquired by PACE Large
Company Value Fund, less the amount of the Liabilities, as of the Valuation
Time.

    On, or as soon as practicable after, the Closing Date, Tax-Managed Equity
Fund will distribute to its shareholders of record as of the Effective Time the
PACE Large Company Value Fund shares it receives, by class, so that each
Tax-Managed Equity Fund shareholder will receive the number of full and
fractional shares of the corresponding class of PACE Large Company Value Fund
equal in aggregate NAV to the shareholder's shares in Tax-Managed Equity Fund.
That distribution will be accomplished by opening accounts on the books of PACE
Large Company Value Fund in the names of Tax-Managed Equity Fund's shareholders
and crediting those accounts with the appropriate number of PACE Large Company
Value Fund shares. Fractional shares of PACE Large Company Value Fund will be
rounded to the third decimal place.

    The NAV per share of PACE Large Company Value Fund will not change as a
result of the Reorganization. Thus, the Reorganization will not result in a
dilution of the interest of any shareholder in either Fund. In addition,
Mitchell Hutchins (not the Funds) will bear the expenses of the Reorganization.
Tax-Managed Equity Fund will be terminated after the Reorganization.

    The consummation of the Reorganization is subject to a number of conditions
set forth in the Plan, some of which may be waived by either Fund. In addition,
the Plan may be amended in any mutually agreeable manner, except that no
amendment may be made subsequent to the Meeting that would have a material
adverse effect on the interests of Tax-Managed Equity Fund's shareholders. If
the Reorganization is not approved by shareholders at the Meeting, Tax-Managed
Equity Fund will continue to operate as a series of Managed Investments Trust,
and its Board will then consider other options and alternatives for the future
of the Fund, including the liquidation of the Fund, resubmitting this proposal
for shareholder approval or other appropriate action.

                                       22
<PAGE>
DESCRIPTION OF SECURITIES TO BE ISSUED

    PACE Large Company Value Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $0.001 per share. The Fund's shares are
divided into five classes, designated Class A, Class B, Class C, Class Y and
Class P shares. Class P shares are not involved in the Reorganization. A share
of each class of PACE Large Company Value Fund represents an identical interest
in the Fund's investment portfolio and has the same rights, privileges and
preferences. Each share of the Fund is entitled to participate equally in
dividends and other distributions of the Fund, except that dividends and other
distributions will appropriately reflect expenses allocated to a particular
class. Shares of the Fund entitle their holders to one vote per full share and
fractional votes for fractional shares held. PACE Trust does not hold annual
meetings. Shares of the Fund generally are voted together, except that only the
shareholders of a particular class of the Fund may vote on matters affecting
only that class, such as the terms of a Rule 12b-1 plan as it relates to the
class. Shares of each series of PACE Trust will be voted separately, except when
an aggregate vote of all the series is required by law.

TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS

    Certain fundamental investment restrictions of Tax-Managed Equity Fund,
which prohibit it from acquiring more than a stated percentage of ownership of
another company, might be construed as restricting its ability to carry out the
Reorganization. By approving the Plan, you agree to waive, only for the purpose
of the Reorganization, those fundamental investment restrictions that could
prohibit or otherwise impede the transaction.

FEDERAL INCOME TAX CONSIDERATIONS

    The Reorganization is intended to be a tax-free reorganization within the
meaning of section 368(a)(1)(C) of the Code. Managed Investments Trust and PACE
Trust each will receive an opinion of Kirkpatrick & Lockhart LLP, counsel to
Managed Investments Trust and tax counsel to PACE Trust, substantially to the
following effect:

        (1)  PACE Large Company Value Fund's acquisition of the Assets in
    exchange solely for its shares and its assumption of the Liabilities,
    followed by Tax-Managed Equity Fund's distribution of those shares PRO RATA
    to its shareholders constructively in exchange for their Tax-Managed Equity
    Fund shares, will qualify as a reorganization within the meaning of section
    368(a)(1)(C) of the Code, and each Fund will be "a party to a
    reorganization" within the meaning of section 368(b) of the Code;

        (2)  Tax-Managed Equity Fund will recognize no gain or loss on its
    transfer of the Assets to PACE Large Company Value Fund in exchange solely
    for PACE Large Company Value Fund shares and PACE Large Company Value Fund's
    assumption of the Liabilities or on the subsequent distribution of those
    shares to Tax-Managed Equity Fund's shareholders in constructive exchange
    for their Tax-Managed Equity Fund shares;

        (3)  PACE Large Company Value Fund will recognize no gain or loss on its
    receipt of the Assets in exchange solely for its shares and its assumption
    of the Liabilities;

        (4)  PACE Large Company Value Fund's basis in the Assets will be the
    same as Tax-Managed Equity Fund's basis therein immediately before the
    Reorganization, and PACE Large Company Value Fund's holding period for the
    Assets will include Tax-Managed Equity Fund's holding period therefor;

        (5)  A Tax-Managed Equity Fund shareholder will recognize no gain or
    loss on the constructive exchange of all its Tax-Managed Equity Fund shares
    solely for PACE Large Company Value Fund shares pursuant to the
    Reorganization; and

        (6)  A Tax-Managed Equity Fund shareholder's aggregate basis in the PACE
    Large Company Value Fund shares it receives in the Reorganization will be
    the same as the aggregate basis for its Tax-Managed Equity Fund shares it
    constructively surrenders in exchange for those PACE Large Company Value
    Fund shares, and its holding period for those PACE Large Company Value Fund
    shares will

                                       23
<PAGE>
    include its holding period for those Tax-Managed Equity Fund shares,
    provided the shareholder holds them as capital assets on the Closing Date.

    The opinion may state that no opinion is expressed as to the effect of the
Reorganization on the Funds or any shareholder with respect to any Asset as to
which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.

    Utilization by PACE Large Company Value Fund after the Reorganization of any
pre-Reorganization capital losses realized by Tax-Managed Equity Fund could be
subject to limitation in future years under the Code.

    You should consult your tax adviser regarding the effect, if any, of the
Reorganization in light of your individual circumstances. Because the foregoing
discussion only relates to the federal income tax consequences of the
Reorganization, you also should consult your tax adviser as to state and local
tax consequences, if any, of the Reorganization.

REQUIRED VOTE

    The proposal to approve the Plan requires the affirmative vote of the lesser
of (1) 67% or more of the shares of Tax-Managed Equity Fund present at the
Meeting, if more than 50% of the outstanding shares are represented at the
Meeting in person or by proxy, or (2) more than 50% of the outstanding shares
entitled to vote at the Meeting.

               THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.

                              -------------------

                           ORGANIZATION OF THE FUNDS

    PACE Large Company Value Fund commenced operations on August 24, 1995 as a
diversified series of PACE Trust. PACE Trust was formed as a Delaware business
trust on September 9, 1994 and is registered under the 1940 Act as an open-end
management investment company. The operations of PACE Trust, as a Delaware
business trust, are governed by its Trust Instrument, By-Laws and Delaware law.

    Tax-Managed Equity Fund commenced operations on December 14, 1998 as a
diversified series of Managed Investments Trust, a Massachusetts business trust
registered under the 1940 Act as an open-end management investment company. The
operations of Managed Investments Trust, as a Massachusetts business trust, are
governed by its Declaration of Trust, By-Laws and Massachusetts law.

                              FINANCIAL HIGHLIGHTS

    The following financial highlights table is intended to help you understand
PACE Large Company Value Fund's financial performance for the periods shown. The
table shows information for the Fund's Class P shares because they were the only
class of shares outstanding during the periods shown. Certain information
reflects financial results for a single Fund share. In the tables, "total
investment return" represents the rate that an investor would have earned (or
lost) on an investment in the Fund, assuming reinvestment of all dividends and
distributions. This information has been audited by Ernst & Young LLP,
independent auditors for PACE Large Company Value Fund, whose report, along with
the Fund's financial statements, is included in the Fund's Annual Report to
Shareholders, dated July 31, 2000, which may be obtained without charge by
calling (800) 647-1568.

                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                      PACE
                                     LARGE COMPANY VALUE EQUITY INVESTMENTS
                           ----------------------------------------------------------
                                         FOR THE YEARS
                                         ENDED JULY 31,                   FOR THE
                           ------------------------------------------   PERIOD ENDED
                             2000#      1999       1998       1997     JULY 31, 1996+
                             -----      ----       ----       ----     --------------
<S>                        <C>        <C>        <C>        <C>        <C>
Net asset value,
  beginning of period....  $  21.14   $  20.27   $  20.03   $  14.07      $ 12.00
                           --------   --------   --------   --------      -------
Net investment income....      0.15       0.13       0.14       0.11         0.12
Net realized and
  unrealized gains
  (losses) from
  investments and
  futures................     (3.17)      2.34       1.63       6.61         2.02
                           --------   --------   --------   --------      -------
Net increase (decrease)
  from investment
  operations.............     (3.02)      2.47       1.77       6.72         2.14
                           --------   --------   --------   --------      -------
Dividends from net
  investment income......     (0.14)     (0.14)     (0.14)     (0.11)       (0.05)
Distributions from net
  realized gains from
  investments............     (1.63)     (1.46)     (1.39)     (0.65)       (0.02)
                           --------   --------   --------   --------      -------
Total dividends and
  distributions..........     (1.77)     (1.60)     (1.53)     (0.76)       (0.07)
                           --------   --------   --------   --------      -------
Net asset value, end of
  period.................  $  16.35   $  21.14   $  20.27   $  20.03      $ 14.07
                           ========   ========   ========   ========      =======
Total investment return
  (1)....................    (14.74)%    12.82%      9.89%     49.13%       17.90%
                           ========   ========   ========   ========      =======
Ratios/Supplemental Data:
Net assets, end of
  period (000's).........  $335,294   $375,465   $266,354   $180,807      $80,897
Expenses to average net
  assets, net of fee
  waivers and expense
  reimbursements.........      0.96%      0.96%      0.98%      1.00%        1.00%*
Expenses to average net
  assets, before fee
  waivers and expense
  reimbursements.........      0.96%      0.96%      0.98%      1.06%        1.40%*
Net investment income to
  average net assets, net
  of fee waivers and
  expense
  reimbursements.........      0.85%      0.71%      0.82%      0.81%        1.22%*
Net investment income to
  average net assets,
  before fee waivers and
  expense
  reimbursements.........      0.85%      0.71%      0.82%      0.75%        0.82%*
Portfolio turnover.......       195%        40%        34%        46%          38%
</TABLE>

-------------------

  +  For the period August 24, 1995 (commencement of operations) through
     July 31, 1996.

  *  Annualized.

  #  Sub-investment advisory functions for this portfolio were transferred from
     Brinson Partners, Inc. to Institutional Capital Corp. and Westwood
     Management Corp. on July 1, 2000.

(1)  Total investment return is calculated assuming a $10,000 investment on the
     first day of each period reported, reinvestment of all dividends and
     distributions at net asset value on the payable dates, and a sale at net
     asset value on the last day of each period reported. The figures do not
     include any applicable sales charges or program fees; results would be
     lower if they were included. Total investment return for period of less
     than one year has not been annualized.

                                       25
<PAGE>
                                 CAPITALIZATION

    The following table shows the capitalization of each of Tax-Managed Equity
Fund and PACE Large Company Value Fund as of July 31, 2000, and the PRO FORMA
capitalization as of the same date, assuming that shareholders of Tax-Managed
Equity Fund and PaineWebber Growth and Income Fund approve the reorganizations
with PACE Large Company Value Fund:

<TABLE>
<CAPTION>
                                              PAINEWEBBER
                                TAX-MANAGED    GROWTH AND   PACE LARGE COMPANY   PRO FORMA CLASS A
                                EQUITY FUND:  INCOME FUND:     VALUE FUND:      COMBINED PACE LARGE
                                  CLASS A       CLASS A          CLASS A        COMPANY VALUE FUND
                                ------------  ------------  ------------------  -------------------
<S>                             <C>           <C>           <C>                 <C>
Net Assets....................  $12,711,483   $731,944,747     $   0               $744,656,230
Shares Outstanding............      933,197     22,516,039         0                 45,545,540
Net Asset Value Per Share.....  $     13.62   $      32.51     $   0               $      16.35

<CAPTION>
                                              PAINEWEBBER
                                TAX-MANAGED    GROWTH AND   PACE LARGE COMPANY   PRO FORMA CLASS B
                                EQUITY FUND:  INCOME FUND:     VALUE FUND:      COMBINED PACE LARGE
                                  CLASS B       CLASS B          CLASS B        COMPANY VALUE FUND
                                ------------  ------------  ------------------  -------------------
<S>                             <C>           <C>           <C>                 <C>
Net Assets....................  $20,655,968   $216,222,256     $   0               $236,878,224
Shares Outstanding............    1,529,570      6,765,936         0                 14,488,224
Net Asset Value Per Share.....  $     13.50   $      31.96     $   0               $      16.35

<CAPTION>
                                              PAINEWEBBER
                                TAX-MANAGED    GROWTH AND   PACE LARGE COMPANY   PRO FORMA CLASS C
                                EQUITY FUND:  INCOME FUND:     VALUE FUND:      COMBINED PACE LARGE
                                  CLASS C       CLASS C          CLASS C        COMPANY VALUE FUND
                                ------------  ------------  ------------------  -------------------
<S>                             <C>           <C>           <C>                 <C>
Net Assets....................  $12,610,157   $126,509,235     $   0               $139,119,392
Shares Outstanding............      933,703      3,950,549         0                  8,508,984
Net Asset Value Per Share.....  $     13.51   $      32.02     $   0               $      16.35

<CAPTION>
                                              PAINEWEBBER
                                TAX-MANAGED    GROWTH AND   PACE LARGE COMPANY   PRO FORMA CLASS Y
                                EQUITY FUND:  INCOME FUND:     VALUE FUND:      COMBINED PACE LARGE
                                  CLASS Y       CLASS Y          CLASS Y        COMPANY VALUE FUND
                                ------------  ------------  ------------------  -------------------
<S>                             <C>           <C>           <C>                 <C>
Net Assets....................  $   252,641   $ 47,106,065     $   0               $ 47,358,706
Shares Outstanding............       18,612      1,444,964         0                  2,896,609
Net Asset Value Per Share.....  $     13.57   $      32.60     $   0               $      16.35

<CAPTION>
                                              PAINEWEBBER
                                TAX-MANAGED    GROWTH AND   PACE LARGE COMPANY   PRO FORMA CLASS P
                                EQUITY FUND:  INCOME FUND:     VALUE FUND:      COMBINED PACE LARGE
                                  CLASS P       CLASS P          CLASS P        COMPANY VALUE FUND
                                ------------  ------------  ------------------  -------------------
<S>                             <C>           <C>           <C>                 <C>
Net Assets....................  $    0        $    0           $335,294,410        $335,294,410
Shares Outstanding............       0             0             20,507,671          20,507,671
Net Asset Value Per Share.....  $    0        $    0           $      16.35        $      16.35
</TABLE>

                                 LEGAL MATTERS

    Certain legal matters concerning the issuance of PACE Large Company Value
Fund shares as part of the Reorganization will be passed upon by Willkie Farr &
Gallagher, 787 Seventh Avenue, New York, New York 10019-6099, counsel to PACE
Trust. Certain legal matters concerning the tax consequences of the

                                       26
<PAGE>
Reorganization will be passed upon by Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, NW, Second Floor, Washington, DC 20036-1800.

         INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION

    PACE Trust and Managed Investments Trust are each subject to the information
requirements of the Securities Exchange Act of 1934 and the 1940 Act and in
accordance therewith each files reports and other information with the SEC.
Reports, proxy statements, registration statements and other information may be
inspected without charge and copied at the Public Reference Room maintained by
the SEC at 450 Fifth Street, N.W., Washington, DC 20549, and at the following
regional offices of the SEC: 7 World Trade Center, Suite 1300, New York, NY
10048, and 500 West Madison Street, 14th floor, Chicago, IL 60661. Information
on the operation of the Public Reference Room may be obtained by calling the SEC
at 1-202-942-8090. The SEC maintains an internet web site at http://www.sec.gov
that contains information regarding PACE Trust and Managed Investments Trust.
Copies of such material may also be obtained, after paying a duplicating fee,
from the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, DC, 20549, or by
electronic request at the following e-mail address: [email protected].

                                    EXPERTS

    The audited financial statements of Tax-Managed Equity Fund incorporated by
reference in the SAI have been audited by Ernst & Young LLP, independent
auditors, whose report thereon is included in Tax-Managed Equity Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 2000. The audited
financial statements of PACE Large Company Value Fund incorporated by reference
in the SAI for the fiscal year ended July 31, 2000 have been audited by Ernst &
Young LLP, independent auditors, whose report thereon is included in PACE Large
Company Value Fund's Annual Report to Shareholders for the fiscal year ended
July 31, 2000. The financial statements audited by Ernst & Young LLP have been
incorporated by reference in the SAI in reliance on its report given on its
authority as experts in auditing and accounting.

                               OTHER INFORMATION

    SHAREHOLDER PROPOSALS.  As a general matter, Managed Investments Trust does
not hold annual or other regular meetings of shareholders. Any shareholder who
wishes to submit proposals to be considered at a special meeting of Tax-Managed
Equity Fund's shareholders should send such proposals to Tax-Managed Equity Fund
at 51 West 52nd Street, New York, New York 10019-6114. Proposals must be
received a reasonable period of time prior to any meeting to be included in the
proxy materials or otherwise considered. Moreover, consideration of such
proposals is subject to limitations under the federal securities laws. Persons
named as proxies for any subsequent shareholders' meeting will vote in their
discretion with respect to proposals presented on an untimely basis.

    OTHER BUSINESS.  Managed Investments Trust's management knows of no other
business to be presented to the Meeting other than the matters set forth in this
Proxy Statement/Prospectus, but should any other matter requiring a vote of
Tax-Managed Equity Fund's shareholders arise, the proxies will vote thereon
according to their best judgment in the interests of the Fund.

                                       27
<PAGE>
                                   APPENDIX A

          FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION

    THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of            , 2001, by and among PaineWebber PACE Select Advisors
Trust, a Delaware business trust ("PACE Trust"), on behalf of PACE Large Company
Value Equity Investments, a segregated portfolio of assets ("series") thereof
("Acquiring Fund"), PaineWebber Managed Investments Trust, a Massachusetts
business trust ("Target Trust"), on behalf of PaineWebber Tax-Managed Equity
Fund, a series thereof ("Target"), and solely for purposes of paragraph 7.2
hereof, Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins").
(Acquiring Fund and Target are sometimes referred to herein individually as a
"Fund" and collectively as the "Funds," and PACE Trust and Target Trust are
sometimes referred to herein individually as an "Investment Company" and
collectively as the "Investment Companies.") All agreements, representations,
actions, and obligations described herein made or to be taken or undertaken by
Acquiring Fund or Target are made and shall be taken or undertaken by PACE Trust
or Target Trust, respectively.

    The Investment Companies wish to effect a reorganization described in
section 368(a)(1) of the Internal Revenue Code of 1986, as amended ("Code"), and
intend this Agreement to be, and adopt it as, a "plan of reorganization" within
the meaning of the regulations under section 368 of the Code ("Regulations").
The reorganization will involve the transfer of Target's assets to Acquiring
Fund in exchange solely for voting shares of beneficial interest in Acquiring
Fund and the assumption by Acquiring Fund of Target's stated liabilities,
followed by the constructive distribution of those shares PRO RATA to the
holders of shares of beneficial interest in Target ("Target Shares") in exchange
therefor, all on the terms and conditions set forth herein. The foregoing
transactions are referred to herein collectively as the "Reorganization."

    The Target Shares are divided into four classes, designated Class A,
Class B, Class C, and Class Y shares ("Class A Target Shares," "Class B Target
Shares," "Class C Target Shares," and "Class Y Target Shares," respectively).
Acquiring Fund's shares are divided into five classes, four of which also are
designated Class A, Class B, Class C, and Class Y shares ("Class A Acquiring
Fund Shares," "Class B Acquiring Fund Shares," "Class C Acquiring Fund Shares,"
and "Class Y Acquiring Fund Shares," respectively, and collectively "Acquiring
Fund Shares"). Each class of Acquiring Fund Shares is substantially similar to
the identically designated class of Target Shares.

    In consideration of the mutual promises contained herein, the parties agree
as follows:

1. PLAN OF REORGANIZATION AND TERMINATION

    1.1. Target agrees to assign, sell, convey, transfer, and deliver all of its
assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring Fund
agrees in exchange therefor--

        (a)  to issue and deliver to Target the number of full and fractional
             (rounded to the third decimal place) (i) Class A Acquiring Fund
             Shares determined by dividing the net value of Target (computed as
             set forth in paragraph 2.1) ("Target Value") attributable to the
             Class A Target Shares by the net asset value ("NAV") of a Class A
             Acquiring Fund Share (computed as set forth in paragraph 2.2),
             (ii) Class B Acquiring Fund Shares determined by dividing the
             Target Value attributable to the Class B Target Shares by the NAV
             of a Class B Acquiring Fund Share (as so computed), (iii) Class C
             Acquiring Fund Shares determined by dividing the Target Value
             attributable to the Class C Target Shares by the NAV of a Class C
             Acquiring Fund Share (as so computed), and (iv) Class Y Acquiring
             Fund Shares determined by dividing the Target Value attributable to
             the Class Y Target Shares by the NAV of a Class Y Acquiring Fund
             Share (as so computed), and

        (b) to assume all of Target's stated liabilities described in paragraph
            1.3 ("Liabilities").

                                      A-1
<PAGE>
Such transactions shall take place at the Closing (as defined in paragraph 3.1).

    1.2. The Assets shall include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights of
action, rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on Target's books, and
other property owned by Target at the Effective Time (as defined in paragraph
3.1).

    1.3. The Liabilities shall include all of Target's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, and whether or not specifically referred to in this Agreement, but
only to the extent disclosed or provided for in Target Trust's financial
statements referred to in paragraph 4.1.18, or otherwise disclosed in writing to
and accepted by PACE Trust. Notwithstanding the foregoing, Target agrees to use
its best efforts to discharge all its Liabilities before the Effective Time.

    1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and substantially all of its realized net
capital gain, if any, for its current taxable year through the Effective Time.

    1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by PACE Trust's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with
the respective PRO RATA number of full and fractional (rounded to the third
decimal place) Acquiring Fund Shares due that Shareholder, by class (I.E., the
account for a Shareholder of Class A Target Shares shall be credited with the
respective PRO RATA number of Class A Acquiring Fund Shares due that
Shareholder; the account for a Shareholder of Class B Target Shares shall be
credited with the respective PRO RATA number of Class B Acquiring Fund Shares
due that Shareholder; the account for a Shareholder of Class C Target Shares
shall be credited with the respective PRO RATA number of Class C Acquiring Fund
Shares due that Shareholder; and the account for a Shareholder of Class Y Target
Shares shall be credited with the respective PRO RATA number of Class Y
Acquiring Fund Shares due that Shareholder). All outstanding Target Shares,
including any represented by certificates, shall simultaneously be canceled on
Target's share transfer books. Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares issued in connection with the
Reorganization.

    1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months after
the Effective Time, Target shall be terminated as a series of Target Trust and
any further actions shall be taken in connection therewith as required by
applicable law.

    1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.

    1.8. Any transfer taxes payable on issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.

2. VALUATION

    2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"), using the
valuation procedures set forth in Acquiring Fund's then-current prospectus

                                      A-2
<PAGE>
and statement of additional information ("SAI"), less (b) the amount of the
Liabilities as of the Valuation Time.

    2.2. For purposes of paragraph 1.1(a), the NAV of each class of Acquiring
Fund Shares shall be computed as of the Valuation Time, using the valuation
procedures set forth in Acquiring Fund's then-current prospectus and SAI.

    2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or
under the direction of Mitchell Hutchins.

3. CLOSING AND EFFECTIVE TIME

    3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on or about
February 23, 2001, or at such other place and/or on such other date as to which
the Investment Companies may agree. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the date
thereof or at such other time as to which the Investment Companies may agree
("Effective Time"). If, immediately before the Valuation Time, (a) the NYSE is
closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or elsewhere is disrupted, so that accurate
appraisal of the Target Value and the NAV of each class of Acquiring Fund Shares
is impracticable, the Effective Time shall be postponed until the first business
day after the day when such trading shall have been fully resumed and such
reporting shall have been restored.

    3.2. Target Trust's fund accounting and pricing agent shall deliver at the
Closing a certificate of an authorized officer verifying that the information
(including adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, transferred by Target to Acquiring Fund, as
reflected on Acquiring Fund's books immediately after the Closing, does or will
conform to such information on Target's books immediately before the Closing.
Target Trust's custodian shall deliver at the Closing a certificate of an
authorized officer stating that the Assets held by the custodian will be
transferred to Acquiring Fund at, or arrangements for the transfer thereof to
Acquiring Fund will have been made on or before, the Effective Time.

    3.3. Target Trust shall deliver to PACE Trust at the Closing a list of the
names and addresses of the Shareholders and the number of outstanding Target
Shares (by class) owned by each Shareholder (rounded to the third decimal
place), all as of the Effective Time, certified by Target Trust's Secretary or
an Assistant Secretary thereof. PACE Trust's transfer agent shall deliver at the
Closing a certificate as to the opening on Acquiring Fund's share transfer books
of accounts in the Shareholders' names. PACE Trust shall issue and deliver a
confirmation to Target Trust evidencing the Acquiring Fund Shares to be credited
to Target at the Effective Time or provide evidence satisfactory to Target Trust
that such Acquiring Fund Shares have been credited to Target's account on
Acquiring Fund's books. At the Closing, each Investment Company shall deliver to
the other bills of sale, checks, assignments, stock certificates, receipts, or
other documents the other Investment Company or its counsel reasonably requests.

    3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.

4. REPRESENTATIONS AND WARRANTIES

    4.1. Target represents and warrants to PACE Trust, on behalf of Acquiring
Fund, as follows:

        4.1.1. Target Trust is a trust operating under a written declaration of
    trust, the beneficial interest in which is divided into transferable shares
    ("Business Trust"), that is duly organized and validly existing under the
    laws of the Commonwealth of Massachusetts; and a copy of its Amended and

                                      A-3
<PAGE>
    Restated Declaration of Trust ("Declaration of Trust") is on file with the
    Secretary of the Commonwealth of Massachusetts;

        4.1.2. Target Trust is duly registered as an open-end management
    investment company under the Investment Company Act of 1940, as amended
    ("1940 Act"), and such registration will be in full force and effect at the
    Effective Time;

        4.1.3. Target is a duly established and designated series of Target
    Trust;

        4.1.4. At the Closing, Target will have good and marketable title to the
    Assets and full right, power, and authority to sell, assign, transfer, and
    deliver the Assets free of any liens or other encumbrances (except
    securities that are subject to "securities loans" as referred to in section
    851(b)(2) of the Code); and on delivery and payment for the Assets,
    Acquiring Fund will acquire good and marketable title thereto;

        4.1.5. Target's current prospectus and SAI conform in all material
    respects to the applicable requirements of the Securities Act of 1933, as
    amended ("1933 Act"), and the 1940 Act and the rules and regulations
    thereunder and do not include any untrue statement of a material fact or
    omit to state any material fact required to be stated therein or necessary
    to make the statements therein, in light of the circumstances under which
    they were made, not misleading;

        4.1.6. Target is not in violation of, and the execution and delivery of
    this Agreement and consummation of the transactions contemplated hereby will
    not conflict with or violate, Massachusetts law or any provision of the
    Declaration of Trust or Target Trust's By-Laws or of any agreement,
    instrument, lease, or other undertaking to which Target is a party or by
    which it is bound or result in the acceleration of any obligation, or the
    imposition of any penalty, under any agreement, judgment, or decree to which
    Target is a party or by which it is bound, except as otherwise disclosed in
    writing to and accepted by PACE Trust;

        4.1.7. Except as otherwise disclosed in writing to and accepted by PACE
    Trust, all material contracts and other commitments of or applicable to
    Target (other than this Agreement and investment contracts, including
    options, futures, and forward contracts) will be terminated, or provision
    for discharge of any liabilities of Target thereunder will be made, at or
    prior to the Effective Time, without either Fund's incurring any liability
    or penalty with respect thereto and without diminishing or releasing any
    rights Target may have had with respect to actions taken or omitted or to be
    taken by any other party thereto prior to the Closing;

        4.1.8. Except as otherwise disclosed in writing to and accepted by PACE
    Trust, no litigation, administrative proceeding, or investigation of or
    before any court or governmental body is presently pending or (to Target
    Trust's knowledge) threatened against Target Trust with respect to Target or
    any of its properties or assets that, if adversely determined, would
    materially and adversely affect Target's financial condition or the conduct
    of its business; and Target Trust knows of no facts that might form the
    basis for the institution of any such litigation, proceeding, or
    investigation and is not a party to or subject to the provisions of any
    order, decree, or judgment of any court or governmental body that materially
    or adversely affects its business or its ability to consummate the
    transactions contemplated hereby;

        4.1.9. The execution, delivery, and performance of this Agreement have
    been duly authorized as of the date hereof by all necessary action on the
    part of Target Trust's board of trustees, which has made the determinations
    required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
    Target's shareholders, this Agreement constitutes a valid and legally
    binding obligation of Target, enforceable in accordance with its terms,
    subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
    moratorium, and laws of general applicability relating to or affecting
    creditors' rights and to general principles of equity;

                                      A-4
<PAGE>
        4.1.10. At the Effective Time, the performance of this Agreement shall
    have been duly authorized by all necessary action by Target's shareholders;

        4.1.11. No governmental consents, approvals, authorizations, or filings
    are required under the 1933 Act, the Securities Exchange Act of 1934, as
    amended ("1934 Act"), or the 1940 Act for the execution or performance of
    this Agreement by Target Trust, except for (a) the filing with the
    Securities and Exchange Commission ("SEC") of a registration statement by
    PACE Trust on Form N-14 relating to the Acquiring Fund Shares issuable
    hereunder, and any supplement or amendment thereto ("Registration
    Statement"), including therein a prospectus/proxy statement ("Proxy
    Statement"), and (b) such consents, approvals, authorizations, and filings
    as have been made or received or as may be required subsequent to the
    Effective Time;

        4.1.12. On the effective date of the Registration Statement, at the time
    of the Meeting (as defined in paragraph 5.2), and at the Effective Time, the
    Proxy Statement will (a) comply in all material respects with the applicable
    provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the
    rules and regulations thereunder and (b) not contain any untrue statement of
    a material fact or omit to state a material fact required to be stated
    therein or necessary to make the statements therein, in light of the
    circumstances under which such statements were made, not misleading;
    provided that the foregoing shall not apply to statements in or omissions
    from the Proxy Statement made in reliance on and in conformity with
    information furnished by PACE Trust for use therein;

        4.1.13. The Liabilities were incurred by Target in the ordinary course
    of its business; and there are no Liabilities other than liabilities
    disclosed or provided for in Target Trust's financial statements referred to
    in paragraph 4.1.18, or otherwise disclosed to and accepted by PACE Trust,
    none of which has been materially adverse to the business, assets, or
    results of Target's operations;

        4.1.14. Target is a "fund" as defined in section 851(g)(2) of the Code;
    it qualified for treatment as a regulated investment company under
    Subchapter M of the Code ("RIC") for each past taxable year since it
    commenced operations and will continue to meet all the requirements for such
    qualification for its current taxable year; the Assets will be invested at
    all times through the Effective Time in a manner that ensures compliance
    with the foregoing; and Target has no earnings and profits accumulated in
    any taxable year in which the provisions of Subchapter M did not apply to
    it;

        4.1.15. Target is not under the jurisdiction of a court in a "title 11
    or similar case" (within the meaning of section 368(a)(3)(A) of the Code);

        4.1.16. Not more than 25% of the value of Target's total assets
    (excluding cash, cash items, and U.S. government securities) is invested in
    the stock and securities of any one issuer, and not more than 50% of the
    value of such assets is invested in the stock and securities of five or
    fewer issuers;

        4.1.17. Target's federal income tax returns, and all applicable state
    and local tax returns, for all taxable years through and including the
    taxable year ended August 31, 1999, have been timely filed and all taxes
    payable pursuant to such returns have been timely paid;

        4.1.18. Target Trust's audited financial statements for the year ended
    August 31, 2000, to be delivered to PACE Trust, fairly represent Target's
    financial position as of each such date and the results of its operations
    and changes in its net assets for the period then ended; and

        4.1.19. Target's management (a) is unaware of any plan or intention of
    Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
    their Target Shares before the Reorganization to any person "related"
    (within the meaning of section 1.368-1(e)(3) of the Regulations) to either
    Fund or (ii) any portion of the Acquiring Fund Shares to be received by them
    in the Reorganization to any person related (within such meaning) to
    Acquiring Fund, (b) does not anticipate dispositions of those Acquiring Fund
    Shares at the time of or soon after the Reorganization to exceed the usual
    rate and frequency of dispositions of shares of Target as a series of an
    open-end investment company,

                                      A-5
<PAGE>
    (c) expects that the percentage of Shareholder interests, if any, that will
    be disposed of as a result of or at the time of the Reorganization will be
    DE MINIMIS, and (d) does not anticipate that there will be extraordinary
    redemptions of Acquiring Fund Shares immediately following the
    Reorganization.

    4.2. Acquiring Fund represents and warrants to Target Trust, on behalf of
Target, as follows:

        4.2.1. PACE Trust is a business trust duly organized, validly existing,
    and in good standing under the laws of the State of Delaware; and its
    Certificate of Trust, including any amendments thereto ("Certificate of
    Trust"), has been duly filed in the office of the Secretary of State
    thereof;

        4.2.2. PACE Trust is duly registered as an open-end management
    investment company under the 1940 Act, and such registration will be in full
    force and effect at the Effective Time;

        4.2.3. Acquiring Fund is a duly established and designated series of
    PACE Trust;

        4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring
    Fund's assumption of the Liabilities) will be issued in exchange for the
    Assets in the Reorganization;

        4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
    hereunder will, at the Effective Time, have been duly authorized and, when
    issued and delivered as provided herein, including the receipt of
    consideration in exchange therefor in excess of the par value thereof, will
    be duly and validly issued and outstanding shares of Acquiring Fund, fully
    paid and non-assessable;

        4.2.6. Acquiring Fund's current prospectus and SAI conform in all
    material respects to the applicable requirements of the 1933 Act and the
    1940 Act and the rules and regulations thereunder and do not include any
    untrue statement of a material fact or omit to state any material fact
    required to be stated therein or necessary to make the statements therein,
    in light of the circumstances under which they were made, not misleading;

        4.2.7. Acquiring Fund is not in violation of, and the execution and
    delivery of this Agreement and consummation of the transactions contemplated
    hereby will not conflict with or violate, Delaware law or any provision of
    PACE Trust's Certificate of Trust, Trust Instrument (including any
    amendments thereto) ("Trust Instrument"), or By-Laws or of any provision of
    any agreement, instrument, lease, or other undertaking to which Acquiring
    Fund is a party or by which it is bound or result in the acceleration of any
    obligation, or the imposition of any penalty, under any agreement, judgment,
    or decree to which Acquiring Fund is a party or by which it is bound, except
    as otherwise disclosed in writing to and accepted by Target Trust;

        4.2.8. Except as otherwise disclosed in writing to and accepted by
    Target Trust, no litigation, administrative proceeding, or investigation of
    or before any court or governmental body is presently pending or (to PACE
    Trust's knowledge) threatened against PACE Trust with respect to Acquiring
    Fund or any of its properties or assets that, if adversely determined, would
    materially and adversely affect Acquiring Fund's financial condition or the
    conduct of its business; and PACE Trust knows of no facts that might form
    the basis for the institution of any such litigation, proceeding, or
    investigation and is not a party to or subject to the provisions of any
    order, decree, or judgment of any court or governmental body that materially
    or adversely affects its business or its ability to consummate the
    transactions contemplated hereby;

        4.2.9. The execution, delivery, and performance of this Agreement have
    been duly authorized as of the date hereof by all necessary action on the
    part of PACE Trust's board of trustees (together with Target Trust's board
    of trustees, the "Boards"), which has made the determinations required by
    Rule 17a-8(a) under the 1940 Act; and this Agreement constitutes a valid and
    legally binding obligation of Acquiring Fund, enforceable in accordance with
    its terms, subject to bankruptcy, insolvency, fraudulent transfer,
    reorganization, moratorium, and laws of general applicability relating to or
    affecting creditors' rights and to general principles of equity;

                                      A-6
<PAGE>
        4.2.10. No governmental consents, approvals, authorizations, or filings
    are required under the 1933 Act, the 1934 Act, or the 1940 Act for the
    execution or performance of this Agreement by PACE Trust, except for
    (a) the filing with the SEC of the Registration Statement and (b) such
    consents, approvals, authorizations, and filings as have been made or
    received or as may be required subsequent to the Effective Time;

        4.2.11. On the effective date of the Registration Statement, at the time
    of the Meeting, and at the Effective Time, the Proxy Statement will
    (a) comply in all material respects with the applicable provisions of the
    1933 Act, the 1934 Act, and the 1940 Act and the rules and regulations
    thereunder and (b) not contain any untrue statement of a material fact or
    omit to state a material fact required to be stated therein or necessary to
    make the statements therein, in light of the circumstances under which such
    statements were made, not misleading; provided that the foregoing shall not
    apply to statements in or omissions from the Proxy Statement made in
    reliance on and in conformity with information furnished by Target Trust for
    use therein;

        4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2) of
    the Code; it qualified for treatment as a RIC for each past taxable year
    since it commenced operations and will continue to meet all the requirements
    for such qualification for its current taxable year; Acquiring Fund intends
    to continue to meet all such requirements for the next taxable year; and it
    has no earnings and profits accumulated in any taxable year in which the
    provisions of Subchapter M of the Code did not apply to it;

        4.2.13. Acquiring Fund has no plan or intention to issue additional
    Acquiring Fund Shares following the Reorganization except for shares issued
    in the ordinary course of its business as a series of an open-end investment
    company; nor does Acquiring Fund or any person "related" (within the meaning
    of section 1.368-1(e)(3) of the Regulations) thereto have any plan or
    intention to redeem or otherwise reacquire any Acquiring Fund Shares issued
    to the Shareholders pursuant to the Reorganization, except to the extent it
    is required by the 1940 Act to redeem any of its shares presented for
    redemption at NAV in the ordinary course of that business;

        4.2.14. Following the Reorganization, Acquiring Fund (a) will continue
    Target's "historic business" (within the meaning of section
    1.368-1(d)(2) of the Regulations) and (b) will use a significant portion of
    Target's "historic business assets" (within the meaning of section
    1.368-1(d)(3) of the Regulations) in a business; in addition, Acquiring Fund
    (c) has no plan or intention to sell or otherwise dispose of any of the
    Assets, except for dispositions made in the ordinary course of that business
    and dispositions necessary to maintain its status as a RIC and (d) expects
    to retain substantially all the Assets in the same form as it receives them
    in the Reorganization, unless and until subsequent investment circumstances
    suggest the desirability of change or it becomes necessary to make
    dispositions thereof to maintain such status;

        4.2.15. There is no plan or intention for Acquiring Fund to be dissolved
    or merged into another business trust or a corporation or any "fund" thereof
    (within the meaning of section 851(g)(2) of the Code) following the
    Reorganization;

        4.2.16. Immediately after the Reorganization, (a) not more than 25% of
    the value of Acquiring Fund's total assets (excluding cash, cash items, and
    U.S. government securities) will be invested in the stock and securities of
    any one issuer and (b) not more than 50% of the value of such assets will be
    invested in the stock and securities of five or fewer issuers;

        4.2.17. Acquiring Fund does not directly or indirectly own, nor at the
    Effective Time will it directly or indirectly own, nor has it directly or
    indirectly owned at any time during the past five years, any shares of
    Target;

                                      A-7
<PAGE>
        4.2.18. Acquiring Fund's federal income tax returns, and all applicable
    state and local tax returns, for all taxable years through and including the
    taxable year ended July 31, 1999, have been timely filed and all taxes
    payable pursuant to such returns have been timely paid; and

        4.2.19. PACE Trust's audited financial statements for the year ended
    July 31, 2000, to be delivered to Target Trust, fairly represent Acquiring
    Fund's financial position as of that date and the results of its operations
    and changes in its net assets for the year then ended.

    4.3. Each Fund represents and warrants to the Trust of which the other Fund
is a series, on behalf of such other Fund, as follows:

        4.3.1. The fair market value of the Acquiring Fund Shares received by
    each Shareholder will be approximately equal to the fair market value of its
    Target Shares constructively surrendered in exchange therefor;

        4.3.2. The Shareholders will pay their own expenses, if any, incurred in
    connection with the Reorganization;

        4.3.3. The fair market value of the Assets on a going concern basis will
    equal or exceed the Liabilities to be assumed by Acquiring Fund and those to
    which the Assets are subject;

        4.3.4. There is no intercompany indebtedness between the Funds that was
    issued or acquired, or will be settled, at a discount;

        4.3.5. Pursuant to the Reorganization, Target will transfer to Acquiring
    Fund, and Acquiring Fund will acquire, at least 90% of the fair market value
    of the net assets, and at least 70% of the fair market value of the gross
    assets, held by Target immediately before the Reorganization. For the
    purposes of this representation, any amounts used by Target to pay its
    Reorganization expenses and to make redemptions and distributions
    immediately before the Reorganization (except (a) redemptions in the
    ordinary course of its business required by section 22(e) of the 1940 Act
    and (b) regular, normal dividend distributions made to conform to its policy
    of distributing all or substantially all of its income and gains to avoid
    the obligation to pay federal income tax and/or the excise tax under section
    4982 of the Code) after the date of this Agreement will be included as
    assets held thereby immediately before the Reorganization;

        4.3.6. None of the compensation received by any Shareholder who is an
    employee of or service provider to Target will be separate consideration
    for, or allocable to, any of the Target Shares held by such Shareholder;
    none of the Acquiring Fund Shares received by any such Shareholder will be
    separate consideration for, or allocable to, any employment agreement,
    investment advisory agreement, or other service agreement; and the
    consideration paid to any such Shareholder will be for services actually
    rendered and will be commensurate with amounts paid to third parties
    bargaining at arm's-length for similar services;

        4.3.7. Immediately after the Reorganization, the Shareholders will not
    own shares constituting "control" (within the meaning of section 304(c) of
    the Code) of Acquiring Fund; and

        4.3.8. Neither Fund will be reimbursed for any expenses incurred by it
    or on its behalf in connection with the Reorganization unless those expenses
    are solely and directly related to the Reorganization (determined in
    accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B.
    187) ("Reorganization Expenses").

                                      A-8
<PAGE>
5. COVENANTS

    5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that--

        (a)  such ordinary course will include declaring and paying customary
             dividends and other distributions and changes in operations
             contemplated by each Fund's normal business activities, and

        (b) each Fund will retain exclusive control of the composition of its
            portfolio until the Closing; provided that if Target's shareholders
            approve this Agreement (and the transactions contemplated hereby),
            then between the date of such approval and the Closing, the Funds
            shall coordinate their respective portfolios so that the transfer of
            the Assets to Acquiring Fund will not cause it to fail to be in
            compliance with any of its investment policies and restrictions
            immediately after the Closing.

    5.2. Target covenants to call a shareholders' meeting to consider and act on
this Agreement and to take all other action necessary to obtain approval of the
transactions contemplated hereby ("Meeting").

    5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.

    5.4. Target covenants that it will assist PACE Trust in obtaining
information PACE Trust reasonably requests concerning the beneficial ownership
of Target Shares.

    5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to PACE Trust at the Closing.

    5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal and state securities laws.

    5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all assignments and other instruments, and will take or cause to be
taken further action, the other Fund may deem necessary or desirable in order to
vest in, and confirm to, (a) Acquiring Fund, title to and possession of all the
Assets, and (b) Target, title to and possession of the Acquiring Fund Shares to
be delivered hereunder, and otherwise to carry out the intent and purpose
hereof.

    5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and state
securities laws it deems appropriate to continue its operations after the
Effective Time.

    5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.

6. CONDITIONS PRECEDENT

    Each Fund's obligations hereunder shall be subject to (a) performance by the
other Fund of all its obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:

                                      A-9
<PAGE>
    6.1. This Agreement and the transactions contemplated hereby shall have been
duly adopted and approved by each Board and shall have been approved by Target's
shareholders in accordance with the Declaration of Trust and Target Trust's
By-Laws and applicable law.

    6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on either Fund's assets or properties, provided that either
Investment Company may for itself waive any of such conditions.

    6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.

    6.4. Target Trust shall have received an opinion of Willkie Farr & Gallagher
("Willkie Farr") substantially to the effect that:

        6.4.1. Acquiring Fund is a duly established series of PACE Trust, a
    business trust duly organized, validly existing, and in good standing under
    the laws of the State of Delaware, with power under its Certificate of Trust
    and Trust Instrument to own all its properties and assets and, to the
    knowledge of Willkie Farr, to carry on its business as presently conducted;

        6.4.2. This Agreement (a) has been duly authorized, executed, and
    delivered by PACE Trust on behalf of Acquiring Fund and (b) assuming due
    authorization, execution, and delivery of this Agreement by Target Trust on
    behalf of Target, is a valid and legally binding obligation of PACE Trust
    with respect to Acquiring Fund, enforceable in accordance with its terms,
    subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
    moratorium, and laws of general applicability relating to or affecting
    creditors' rights and to general principles of equity;

        6.4.3. The Acquiring Fund Shares to be issued and distributed to the
    Shareholders under this Agreement, assuming their due delivery as
    contemplated by this Agreement and the receipt of consideration in exchange
    therefor in excess of the par value thereof, will be duly authorized,
    validly issued and outstanding, and fully paid and non-assessable;

        6.4.4. The execution and delivery of this Agreement did not, and the
    consummation of the transactions contemplated hereby will not, materially
    violate PACE Trust's Certificate of Trust, Trust Instrument, or By-Laws or
    any provision of any agreement (known to Willkie Farr, without any
    independent inquiry or investigation) to which PACE Trust (with respect to
    Acquiring Fund) is a party or by which it is bound or (to the knowledge of
    Willkie Farr, without any independent inquiry or investigation) result in
    the acceleration of any obligation, or the imposition of any penalty, under
    any agreement, judgment, or decree to which PACE Trust (with respect to
    Acquiring Fund) is a party or by which it is bound, except as set forth in
    such opinion or as otherwise disclosed in writing to and accepted by Target
    Trust;

        6.4.5. To the knowledge of Willkie Farr (without any independent inquiry
    or investigation), no consent, approval, authorization, or order of any
    court or governmental authority is required for the consummation by PACE
    Trust on behalf of Acquiring Fund of the transactions contemplated herein,

                                      A-10
<PAGE>
    except those obtained under the 1933 Act, the 1934 Act, and the 1940 Act and
    those that may be required under state securities laws;

        6.4.6. PACE Trust is registered with the SEC as an investment company,
    and to the knowledge of Willkie Farr no order has been issued or proceeding
    instituted to suspend such registration; and

        6.4.7. To the knowledge of Willkie Farr (without any independent inquiry
    or investigation), (a) no litigation, administrative proceeding, or
    investigation of or before any court or governmental body is pending or
    threatened as to PACE Trust (with respect to Acquiring Fund) or any of its
    properties or assets attributable or allocable to Acquiring Fund and
    (b) PACE Trust (with respect to Acquiring Fund) is not a party to or subject
    to the provisions of any order, decree, or judgment of any court or
    governmental body that materially and adversely affects Acquiring Fund's
    business, except as set forth in such opinion or as otherwise disclosed in
    writing to and accepted by Target Trust.

In rendering such opinion, Willkie Farr may (1) rely (i) as to matters governed
by the laws of the State of Delaware, on an opinion of competent Delaware
counsel, and (ii) as to certain factual matters, on a certificate of PACE Trust,
(2) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof,
(3) limit such opinion to applicable federal and state law, and (4) define the
word "knowledge" and related terms to mean the knowledge of attorneys then with
Willkie Farr who have devoted substantive attention to matters directly related
to this Agreement and the Reorganization.

    6.5. PACE Trust shall have received an opinion of Kirkpatrick & Lockhart LLP
("K&L") substantially to the effect that:

        6.5.1. Target is a duly established series of Target Trust, a Business
    Trust duly organized and validly existing under the laws of the Commonwealth
    of Massachusetts with power under the Declaration of Trust to own all its
    properties and assets and, to the knowledge of K&L, to carry on its business
    as presently conducted;

        6.5.2. This Agreement (a) has been duly authorized, executed, and
    delivered by Target Trust on behalf of Target and (b) assuming due
    authorization, execution, and delivery of this Agreement by PACE Trust on
    behalf of Acquiring Fund, is a valid and legally binding obligation of
    Target Trust with respect to Target, enforceable in accordance with its
    terms, subject to bankruptcy, insolvency, fraudulent transfer,
    reorganization, moratorium, and laws of general applicability relating to or
    affecting creditors' rights and to general principles of equity;

        6.5.3. The execution and delivery of this Agreement did not, and the
    consummation of the transactions contemplated hereby will not, materially
    violate the Declaration of Trust or Target Trust's By-Laws or any provision
    of any agreement (known to K&L, without any independent inquiry or
    investigation) to which Target Trust (with respect to Target) is a party or
    by which it is bound or (to the knowledge of K&L, without any independent
    inquiry or investigation) result in the acceleration of any obligation, or
    the imposition of any penalty, under any agreement, judgment, or decree to
    which Target Trust (with respect to Target) is a party or by which it is
    bound, except as set forth in such opinion or as otherwise disclosed in
    writing to and accepted by PACE Trust;

        6.5.4. To the knowledge of K&L (without any independent inquiry or
    investigation), no consent, approval, authorization, or order of any court
    or governmental authority is required for the consummation by Target Trust
    on behalf of Target of the transactions contemplated herein, except those
    obtained under the 1933 Act, the 1934 Act, and the 1940 Act and those that
    may be required under state securities laws;

        6.5.5. Target Trust is registered with the SEC as an investment company,
    and to the knowledge of K&L no order has been issued or proceeding
    instituted to suspend such registration; and

                                      A-11
<PAGE>
        6.5.6. To the knowledge of K&L (without any independent inquiry or
    investigation), (a) no litigation, administrative proceeding, or
    investigation of or before any court or governmental body is pending or
    threatened as to Target Trust (with respect to Target) or any of its
    properties or assets attributable or allocable to Target and (b) Target
    Trust (with respect to Target) is not a party to or subject to the
    provisions of any order, decree, or judgment of any court or governmental
    body that materially and adversely affects Target's business, except as set
    forth in such opinion or as otherwise disclosed in writing to and accepted
    by PACE Trust.

In rendering such opinion, K&L may (1) rely, as to certain factual matters, on a
certificate of Target Trust, (2) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (3) limit such opinion to applicable federal
and state law, and (4) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with K&L who have devoted substantive attention to
matters directly related to this Agreement and the Reorganization.

    6.6. Each Investment Company shall have received an opinion of K&L,
addressed to and in form and substance reasonably satisfactory to it, as to the
federal income tax consequences mentioned below ("Tax Opinion"). In rendering
the Tax Opinion, K&L may rely as to factual matters, exclusively and without
independent verification, on the representations made in this Agreement, which
K&L may treat as representations made to it, or in separate letters addressed to
K&L and the certificates delivered pursuant to paragraph 3.4. The Tax Opinion
shall be substantially to the effect that, based on the facts and assumptions
stated therein and conditioned on consummation of the Reorganization in
accordance with this Agreement, for federal income tax purposes:

        6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for
    Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities,
    followed by Target's distribution of those shares PRO RATA to the
    Shareholders constructively in exchange for their Target Shares, will
    qualify as a reorganization within the meaning of section 368(a)(1) of the
    Code, and each Fund will be "a party to a reorganization" within the meaning
    of section 368(b) of the Code;

        6.6.2. Target will recognize no gain or loss on the transfer of the
    Assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and
    Acquiring Fund's assumption of the Liabilities or on the subsequent
    distribution of those shares to the Shareholders in constructive exchange
    for their Target Shares;

        6.6.3. Acquiring Fund will recognize no gain or loss on its receipt of
    the Assets in exchange solely for Acquiring Fund Shares and its assumption
    of the Liabilities;

        6.6.4. Acquiring Fund's basis in the Assets will be the same as Target's
    basis therein immediately before the Reorganization, and Acquiring Fund's
    holding period for the Assets will include Target's holding period therefor;

        6.6.5. A Shareholder will recognize no gain or loss on the constructive
    exchange of all its Target Shares solely for Acquiring Fund Shares pursuant
    to the Reorganization; and

        6.6.6. A Shareholder's aggregate basis in the Acquiring Fund Shares to
    be received by it in the Reorganization will be the same as the aggregate
    basis in its Target Shares to be constructively surrendered in exchange for
    those Acquiring Fund Shares, and its holding period for those Acquiring Fund
    Shares will include its holding period for those Target Shares, provided the
    Shareholder held them as capital assets at the Effective Time.

Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting.

                                      A-12
<PAGE>
    At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.

7. BROKERAGE FEES AND EXPENSES

    7.1. Each Investment Company represents and warrants to the other that there
are no brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.

    7.2. The Reorganization Expenses will be borne by Mitchell Hutchins.

8. ENTIRE AGREEMENT; NO SURVIVAL

    Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.

9. TERMINATION OF AGREEMENT

    This Agreement may be terminated at any time at or before the Effective
Time, whether before or after approval by Target's shareholders:

    9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
before the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before July 1, 2001; or

    9.2. By the parties' mutual agreement.

    In the event of termination under paragraphs 9.1(c) or 9.2, there shall be
no liability for damages on the part of either Fund, or the trustees or officers
of either Investment Company, to the other Fund.

10. AMENDMENT

    This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in any manner
mutually agreed on in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.

11. MISCELLANEOUS

    11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.

    11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.

    11.3. PACE Trust acknowledges that Target Trust is a Business Trust. This
Agreement is executed by Target Trust on behalf of Target and by its trustees
and/or officers in their capacities as such, and not individually. Target
Trust's obligations under this Agreement are not binding on or enforceable
against any of its trustees, officers, or shareholders but are only binding on
and enforceable against Target's assets and property; and a trustee of Target
Trust shall not be personally liable hereunder to PACE Trust or its trustees or
shareholders for any act, omission, or obligation of Target Trust or any other
trustee thereof. PACE Trust agrees that, in asserting any rights or claims under
this Agreement on behalf of Acquiring Fund, it shall look only to Target's
assets and property in settlement of such rights or claims and not to such
trustees, officers, or shareholders.

                                      A-13
<PAGE>
    11.4. A trustee of PACE Trust shall not be personally liable hereunder to
Target Trust or its trustees or shareholders for any act, omission, or
obligation of PACE Trust or any other trustee thereof. Target Trust agrees that,
in asserting any claim against PACE Trust or its trustees, it shall look only to
Acquiring Fund's assets for payment under such claim; and neither the
shareholders nor the trustees of PACE Trust, nor any of their agents, whether
past, present, or future, shall be personally liable therefor.

    11.5. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment Company and
delivered to the other party hereto. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

    IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.

<TABLE>
<S>                                       <C>  <C>
                                          PAINEWEBBER MANAGED INVESTMENTS TRUST,
                                            acting on behalf of its series,
                                            PaineWebber Tax- Managed Equity Fund

                                          By:
                                               ......................................

                                          PAINEWEBBER PACE SELECT ADVISORS TRUST,
                                            acting on behalf of its series, PACE
                                            Large Company Value Equity Investments

                                          By:
                                               ......................................

                                          Solely with respect to paragraph 7.2
                                            hereof:
                                            MITCHELL HUTCHINS ASSET MANAGEMENT INC.

                                          By:
                                               ......................................
</TABLE>

                                      A-14
<PAGE>
                                   APPENDIX B

                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

    As of the Record Date, the following shareholders owned beneficially or of
record 5% or more of a class of shares of Tax-Managed Equity Fund or PACE Large
Company Value Fund. Mitchell Hutchins did not know of any other person who owned
beneficially or of record 5% or more of any class of either Fund's outstanding
equity securities as of the Record Date.

    The percent beneficial ownership in the combined PACE Large Company Value
Fund shown below assumes that shareholders of both Tax-Managed Equity Fund and
PaineWebber Growth and Income Fund approve the reorganization with PACE Large
Company Value Fund.

                            TAX-MANAGED EQUITY FUND

<TABLE>
<CAPTION>
                                                                     PRO FORMA
                                                                PERCENT BENEFICIAL
                                          PERCENT BENEFICIAL   OWNERSHIP OF COMBINED
                                           OWNERSHIP OF TAX-        PACE LARGE
SHAREHOLDER'S NAME/ADDRESS*               MANAGED EQUITY FUND   COMPANY VALUE FUND
---------------------------               -------------------  ---------------------
<S>                                       <C>                  <C>
PaineWebber Group Inc.                          10.49%                 0.17%
Senior Officer Deferred                    (Class A Shares)      (Class A Shares)
Compensation Plan Trust FBO
Margo N. Alexander
c/o John Blenman/Chase Manhattan

Bernice F. Thomas, PACE                          8.96%                 0.06%
                                           (Class Y Shares)      (Class Y Shares)

Mildred F. Bishop Revocable Trust                8.68%                 0.06%
u/a/d 12/17/96,                            (Class Y Shares)      (Class Y Shares)
Joann Klepzig, Trustee

Wilma M. Crowther Revocable Trust                8.30%                 0.05%
Wilma Crowther and Dennis Crowther,        (Class Y Shares)      (Class Y Shares)
Co-Trustees
u/a/d 4/6/93

Susan Chasco-Langschwager, Trustee of            7.73%                 0.05%
the                                        (Class Y Shares)      (Class Y Shares)
Susan Chasco-Langschwager Living Trust
dated 6/4/98, c/o Gazebo Sport

Comerica Bank, Trustee FBO Trust C under         6.68%                 0.04%
the Franklin Bond and Edna D. Bond Trust   (Class Y Shares)      (Class Y Shares)
dated 4/2/92

Colleen C. McClellan                             5.99%                 0.04%
                                           (Class Y Shares)      (Class Y Shares)

Vicki Thomas, PACE                               5.16%                 0.03%
                                           (Class Y Shares)      (Class Y Shares)
</TABLE>

-------------------

  *  The shareholders listed may be contacted c/o Mitchell Hutchins Asset
     Management Inc., 51 West 52nd Street, New York, NY 10019-6114.

                                      B-1
<PAGE>
                         PACE LARGE COMPANY VALUE FUND

<TABLE>
<CAPTION>
                                                                    PRO FORMA
                                          PERCENT BENEFICIAL   PERCENT BENEFICIAL
                                          OWNERSHIP OF PACE   OWNERSHIP OF COMBINED
                                            LARGE COMPANY      PACE LARGE COMPANY
SHAREHOLDER'S NAME/ADDRESS*                   VALUE FUND           VALUE FUND
---------------------------               ------------------  ---------------------
<S>                                       <C>                 <C>
PaineWebber Custodian                           24.84%                 **
PaineWebber CDN FBO Michael L. Aikman      (Class A Shares)     (Class A Shares)

Lisa L. Bennett                                 24.67%                 **
                                           (Class A Shares)     (Class A Shares)

PW Custodian PaineWebber CDN FBO                14.82%                 **
Virginia E. Duffy                          (Class A Shares)     (Class A Shares)

Robert J. Dorfman                               12.93%                 **
                                           (Class A Shares)     (Class A Shares)

PW Custodian PaineWebber CDN FBO Alex J.        12.35%                 **
Hadfield                                   (Class A Shares)     (Class A Shares)

J. Eric Casey                                   7.76%                  **
                                           (Class A Shares)     (Class A Shares)

Trust u/w Harold McGackin                       73.84%                0.01%
dated 1/29/88                              (Class B Shares)     (Class B Shares)
Louise B. Pilot, Trustee

Dan Pawlak                                      18.46%                 **
                                           (Class B Shares)     (Class B Shares)

Robert Kaplan and                               7.68%                  **
Cathy Kaplan, Joint Owners                 (Class B Shares)     (Class B Shares)

PW Custodian                                    37.17%                0.01%
PaineWebber CDN FBO Donald Fath            (Class C Shares)     (Class C Shares)

PW Custodian                                    20.47%                 **
PaineWebber CDN FBO Doris L. Barlock       (Class C Shares)     (Class C Shares)

PW Custodian                                    15.94%                 **
PaineWebber CDN FBO Herbert D. Jones       (Class C Shares)     (Class C Shares)

PW Custodian                                    11.74%                 **
PaineWebber CDN FBO Sandra L. Kuritzky     (Class C Shares)     (Class C Shares)

Alan C. Budney and                              6.74%                  **
Michele M. Budney, Joint Owners            (Class C Shares)     (Class C Shares)

PW Custodian                                    5.42%                  **
PaineWebber CDN FBO Thomas K. Davila       (Class C Shares)     (Class C Shares)
</TABLE>

-------------------

  *  The shareholders listed may be contacted c/o Mitchell Hutchins Asset
     Management Inc., 51 West 52nd Street, New York, NY 10019-6114.

 **  This shareholder's PRO FORMA percentage of beneficial ownership of the
     specified class of shares in the combined PACE Large Company Value Fund is
     less than one hundredth of one percent.

                                      B-2
<PAGE>
                                   APPENDIX C

     MANAGEMENT'S DISCUSSION OF PACE LARGE COMPANY VALUE FUND'S PERFORMANCE

    THE DISCUSSION BELOW WAS TAKEN FROM PACE LARGE COMPANY VALUE FUND'S ANNUAL
REPORT FOR ITS FISCAL YEAR ENDED JULY 31, 2000. THIS DISCUSSION HAS NOT BEEN
REVISED TO REFLECT SUBSEQUENT CHANGES, WHICH ARE DISCUSSED ABOVE IN THE PROXY
STATEMENT/PROSPECTUS.

    ADVISERS: Westwood Management Corporation and Institutional Capital
Corporation

    PORTFOLIO MANAGERS: (Westwood) Susan Byrne and Kellie Stark; ICAP Investment
Team

    OBJECTIVE: Capital appreciation and dividend income

    WESTWOOD INVESTMENT PROCESS: Westwood screens large capitalization companies
for those that have reported a positive earnings surprise which has received
little or no recognition in the form of positive future earnings revisions, and
for those companies that have a price-to-sales ratio less than the Standard &
Poor's 500 Index. These companies are further screened to identify those with
improving returns on equity combined with stable-to-declining debt/equity
ratios. Forward-looking fundamental analysis is then applied to these potential
investments. Those companies that pass through the screening and fundamental
research process are placed on a monitor list, at which point a catalyst for
purchase is sought.

    ICAP INVESTMENT PROCESS: ICAP uses a team approach with a value-oriented
investment style. ICAP uses a proprietary model to identify large capitalization
companies that ICAP believes offer the best relative values. ICAP further
narrows its search to companies where a catalyst for positive change is, in
ICAP's view, about to occur. Finally, ICAP researches the financial condition
and business prospects of those companies where a catalyst may be about to
occur.

AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 7/31/00

<TABLE>
<CAPTION>
                                   6 MONTHS         1 YEAR       3 YEARS  SINCE INCEPTION 8/24/95
                                   --------         ------       -------  -----------------------
<S>                             <C>             <C>              <C>      <C>
With PACE program fee*........      -0.01%          -16.01%       0.35%           11.67%
Without PACE program fee......      0.74%           -14.74%       1.87%           13.36%
Russell 1000 Value Index......      0.24%           -5.00%        8.74%           17.24%
Lipper Multi-Cap Value Funds
  Median......................      4.20%           -2.24%        5.23%           13.75%
</TABLE>

-------------------

  *  The maximum annual PACE program fee is 1.5% of the value of PACE assets.

    Past performance does not predict future performance. The return and
principal value of an investment will fluctuate, so that an investor's shares,
when redeemed, may be worth more or less than their original cost. Performance
results assume reinvestment of all dividends and capital gains. Total returns
for periods of one year or less are cumulative.

                                      C-1
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PORTFOLIO AND THE
RUSSELL 1000 VALUE INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
        PORTFOLIO WITHOUT FEE  PORTFOLIO WITH FEE*  RUSSELL 1000 VALUE INDEX
<S>     <C>                    <C>                  <C>
Aug-95                $10,117              $10,113                   $10,000
Sep-95                $10,442              $10,425                   $10,362
Oct-95                $10,408              $10,379                   $10,259
Nov-95                $10,975              $10,930                   $10,780
Dec-95                $11,169              $11,110                   $11,050
Jan-96                $11,622              $11,546                   $11,395
Feb-96                $11,798              $11,706                   $11,482
Mar-96                $12,016              $11,907                   $11,677
Apr-96                $12,242              $12,116                   $11,721
May-96                $12,426              $12,283                   $11,868
Jun-96                $12,384              $12,227                   $11,877
Jul-96                $11,790              $11,625                   $11,428
Aug-96                $12,250              $12,064                   $11,755
Sep-96                $12,795              $12,585                   $12,223
Oct-96                $13,072              $12,840                   $12,696
Nov-96                $13,968              $13,704                   $13,616
Dec-96                $13,974              $13,693                   $13,442
Jan-97                $14,483              $14,174                   $14,094
Feb-97                $14,580              $14,250                   $14,301
Mar-97                $14,106              $13,770                   $13,786
Apr-97                $14,527              $14,163                   $14,365
May-97                $15,598              $15,188                   $15,168
Jun-97                $16,326              $15,878                   $15,819
Jul-97                $17,581              $17,077                   $17,009
Aug-97                $16,888              $16,383                   $16,403
Sep-97                $17,643              $17,094                   $17,394
Oct-97                $16,669              $16,130                   $16,909
Nov-97                $17,028              $16,458                   $17,656
Dec-97                $17,433              $16,827                   $18,171
Jan-98                $17,557              $16,926                   $17,914
Feb-98                $19,081              $18,373                   $19,120
Mar-98                $20,178              $19,404                   $20,289
Apr-98                $19,977              $19,187                   $20,425
May-98                $19,691              $18,889                   $20,122
Jun-98                $19,815              $18,984                   $20,380
Jul-98                $19,320              $18,486                   $20,020
Aug-98                $16,565              $15,831                   $17,041
Sep-98                $17,747              $16,939                   $18,019
Oct-98                $19,091              $18,199                   $19,416
Nov-98                $19,892              $18,938                   $20,320
Dec-98                $20,632              $19,619                   $21,011
Jan-99                $20,498              $19,467                   $21,179
Feb-99                $19,715              $18,700                   $20,881
Mar-99                $20,395              $19,321                   $21,313
Apr-99                $22,220              $21,024                   $23,304
May-99                $21,901              $20,695                   $23,047
Jun-99                $22,777              $21,496                   $23,716
Jul-99                $21,798              $20,546                   $23,021
Aug-99                $21,024              $19,793                   $22,167
Sep-99                $19,498              $18,333                   $21,393
Oct-99                $19,539              $18,349                   $22,625
Nov-99                $19,653              $18,432                   $22,449
Dec-99                $19,779              $18,527                   $22,557
Jan-00                $18,449              $17,260                   $21,821
Feb-00                $16,937              $15,825                   $20,200
Mar-00                $18,630              $17,386                   $22,664
Apr-00                $19,460              $18,138                   $22,401
May-00                $19,699              $18,337                   $22,637
Jun-00                $18,869              $17,543                   $21,602
Jul-00                $18,585              $17,257                   $21,872
</TABLE>

     The graph depicts the performance of PACE Large Company Value Equity
Investments versus the Russell 1000 Value Index. It is important to note that
PACE Large Company Value Equity Investments is a professionally managed
portfolio while the Index is not available for investment and is unmanaged. The
comparison is shown for illustrative purposes only.

ADVISERS' COMMENTS

    On July 1, 2000, Westwood Management Corporation and Institutional Capital
Corporation replaced Brinson Partners, Inc. as the advisers for the Portfolio.

WESTWOOD MANAGEMENT

    During the 12-month period ended July 31, 2000, the performance of the Large
Company Value Equity Investments Portfolio lagged that of its benchmark, the
Russell 1000 Value Index.

    The second half of 1999 ran rampant with the technology sector remaining in
the lead. Dot Com was the theme despite a series of rate hikes beginning
June 30th, as inflationary pressures crept into the markets. Throughout the
domestic and foreign economies merger announcements continued to make headlines
and drive equity prices. After the beginning of the millennium, the market
rotated away from technology related issues as investors began to fear future
earnings results and retreated to the blue chip, "old economy" names and gave up
their "new economy" growth oriented names. Oil peaked to new highs as OPEC talks
regarding the production levels continued, and finished at $32 levels. Economic
growth over the past 12 months remained quite strong, as real GDP expanded by
6.1%.

    For the month of July 2000, the Portfolio declined 1.63%, after deduction of
fees. In contrast, the Portfolio's benchmark, the Russell 1000 Value Index, rose
1.25%. The performance and overweighting in the energy and technology areas had
a negative impact on the Portfolio's return. However, stock selection and an
overweighting in healthcare aided performance. Stock selection in finance and
basic materials also helped performance.

    In July 2000, volatility continued to be the dominant theme for the NASDAQ
Composite Index. Following a strong rally, the NASDAQ declined sharply in the
second half of the month. Momentum investors were scared out of large-cap growth
stocks when a few large technology companies announced that earnings would lag
original forecasts. Energy prices declined from their highs, as OPEC production
increased and inventory levels began a seasonal build. The transportation and
financial sectors led the

                                      C-2
<PAGE>
market in July. Financial stocks strengthened, as investors viewed the prospect
of higher interest rates as positive for the banking sector. Communication
services, healthcare and consumer cyclicals were among the market sectors that
declined during July. At the end of the fiscal year, Westwood's portion of the
portfolio was overweighted in energy, consumer cyclicals, technology and
transportation stocks.

INSTITUTIONAL CAPITAL CORPORATION

    Performance in the equity markets over the past twelve months was more
notable for volatility than for returns. It appeared that economic growth had
begun to moderate. However, there was also upward pressure on wages and prices.
As a result, investors were anticipating modest tightening by the Federal
Reserve Board for the rest of 2000.

    The stock market continued its volatile behavior in July 2000. Equity prices
rose sharply in the first half of the month but reversed course and registered
new losses by the end of the month. In comparison to the Portfolio's benchmark,
the Russell 1000 Value Index, Institutional Capital Corporation's portion of the
Portfolio was overweighted in technology and healthcare stocks and underweighted
in financial stocks.

    We believe that there are many good individual investment opportunities in
the market. Valuation disparities remain extremely wide. In the technology
sector, a concentration of capitalization and an extension of valuation have
come at the expense of all other market sectors. As a result, a broad range of
companies is selling substantially below recent highs, where valuations are a
fraction of historic levels and where earnings prospects are intact. We will
continue to seek investment opportunities in companies that are undervalued
relative to their peer groups and to the market and which have an upside
potential of at least 20% over the next 12 to 18 months.

                                      C-3
<PAGE>
PACE LARGE COMPANY VALUE EQUITY INVESTMENTS--PORTFOLIO STATISTICS

<TABLE>
<CAPTION>
CHARACTERISTICS*                                    7/31/00
----------------                                    -------
<S>                                                 <C>
Size of Portfolio ($MM)...........................  $335.3
Number of Securities..............................      92
Stocks............................................    97.8%
Cash & Equivalents................................     2.2%

<CAPTION>
TOP TEN HOLDINGS*                                   7/31/00
-----------------                                   -------
<S>                                                 <C>
Citigroup.........................................     3.2%
Exxon Mobil.......................................     3.2
IBM...............................................     3.1
Verizon Communications............................     3.0
Pharmacia.........................................     2.7
Conoco............................................     2.4
Philips Electronics...............................     2.1
Ford Motor Co.....................................     1.7
Union Carbide.....................................     1.6
Wellpoint Health Networks.........................     1.6
-----------------------------------------------------------
Total.............................................    24.6%

<CAPTION>
TOP FIVE SECTORS*                                   7/31/00
-----------------                                   -------
<S>                                                 <C>
Consumer Cyclical.................................    15.8%
Financial Services................................    15.3
Technology........................................    13.5
Energy............................................    12.3
Utility...........................................    10.0
-----------------------------------------------------------
Total.............................................    66.9%
</TABLE>

-------------------

  *  Weightings represent percentages of net assets as of July 31, 2000. The
     Portfolio is actively managed and all holdings are subject to change.

                                      C-4
<PAGE>

                      EVERY SHAREHOLDER'S VOTE IS IMPORTANT


                        PLEASE SIGN, DATE AND RETURN YOUR
                                   PROXY TODAY




                  Please detach at perforation before mailing.






PROXY                  PAINEWEBBER TAX-MANAGED EQUITY FUND                 PROXY
               (A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
               SPECIAL MEETING OF SHAREHOLDERS - FEBRUARY 1, 2001

THIS PROXY IS BEING SOLICITED FOR THE BOARD OF TRUSTEES OF PAINEWEBBER MANAGED
INVESTMENTS TRUST ("TRUST") ON BEHALF OF THE FUND LISTED ABOVE, A SERIES OF THE
TRUST. The undersigned hereby appoints as proxies Robyn Green and Keith Weller,
and each of them (with the power of substitution) to vote for the undersigned
all shares of beneficial interest of the undersigned in the Fund listed above at
the above referenced meeting and any adjournment thereof, with all the power the
undersigned would have if personally present. The shares represented by this
proxy will be voted as instructed on the reverse side of this proxy card. UNLESS
INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE
"FOR" THE PROPOSAL.

VOTE TODAY BY MAIL, TOUCH-TONE PHONE OR THE INTERNET. CALL TOLL FREE
1-800-597-7836 OR LOG ON TO https://vote.proxy-direct.com. SEE THE ENCLOSED
INSERT FOR FURTHER INSTRUCTIONS.


                                        CONTROL NUMBER: 999 9999 9999 999


                                        NOTE: If shares are held by an
                                        individual, sign your name exactly as it
                                        appears on this card. If shares are held
                                        jointly, either party may sign, but the
                                        name of the party signing should conform
                                        exactly to the name shown on this proxy
                                        card. If shares are held by a
                                        corporation, partnership or similar
                                        account, the name and the capacity of
                                        the individual signing the proxy card
                                        should be indicated - for example: "ABC
                                        Corp., John Doe, Treasurer."

---------------------------------------------------------------------
Signature

---------------------------------------------------------------------
Signature (if held jointly)

---------------------------------------------------------------------
Date


             PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD.

<PAGE>



                      EVERY SHAREHOLDER'S VOTE IS IMPORTANT


                        PLEASE SIGN, DATE AND RETURN YOUR
                                   PROXY TODAY



                  Please detach at perforation before mailing.




THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THE PROPOSAL. PLEASE INDICATE YOUR
VOTE BY FILLING IN THE BOX COMPLETELY. EXAMPLE:




<TABLE>
<CAPTION>
<S>  <C>                                         <C>         <C>            <C>
1.   Approval of the Agreement and Plan of       FOR         AGAINST        ABSTAIN
     Reorganization and Termination that         / /           / /            / /
     provides for the reorganization of
     PaineWebber Tax-Managed Equity Fund,
     a series of PaineWebber Managed
     Investments Trust, into PACE Large
     Company Value Equity Investments,
     a series of PaineWebber PACE
     Select Advisors Trust.
</TABLE>



               PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.


<PAGE>

                         YOUR PROXY VOTE IS IMPORTANT!


                         AND NOW YOU CAN VOTE YOUR PROXY
                         ON THE PHONE OR ON
                         THE INTERNET.

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                             instructions, OR GO TO WEBSITE:
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                         3.  Enter your 14 digit CONTROL NUMBER from your
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                         5.  Do NOT mail your Proxy Card when you vote by phone
                             or internet.

                         6.  If you have any questions regarding the meeting
                             agenda or the execution of your proxy, please call.
                             1-877-388-2844.










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